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THE  DEVELOPMENT  OF 
ECONOMICS 

1750-1900 


THE  MACMILLAN  COMPANY 

NEW  YORK    •    BOSTON    •    CHICAGO 
DALLAS   •    ATLANTA    •    SAN   FRANCISCO 

MACMILLAN  &  CO..  Limited 

LONDON  •  BOMBAY  •  CALCUTTA 
MELBOURNE 

THE  MACMILLAN  CO.  OF  CANADA,  Ltd. 

TORONTO 


THE  DEVELOPMENT  OF 
ECONOMICS 

1750-1900 


Jf  BY 

O.  FRED  BOUCKE 

PROFESSOR     OF     ECONO:MICS     AT     PEHTNSYLVANIA 

STATE    COLLEGE 
AUTHOR       OF       "the       LIMITS       OF       SOCIALISM" 


THE  MACMILLAN  COMPANY 
1921 

All  rights  reserved 


FEINTED  IN   THE  UNITED  STATES  OF  AMEEICA 


HS75 
6(0 


COPTRIQHT,    1921, 

By  the  MACMILLAN  COMPANY 


Set  up  and  printed.     Published  September,  1921. 


PREFACE 

The  main  purpose  of  this  short  history  of  economics 
as  a  science  is  to  help  students  find  a  perspective  for  a 
large  variety  of  facts  whose  connection  and  common 
ground  may  be  easily  lost  sight  of;  and  beyond  that  to 
show  with  some  degree  of  definiteness  how  far  economics 
even  today  rests  on  concepts  worked  out  during  the 
eighteenth  century. 

To  attain  these  two  ends  the  writer  has  ignored  some 
material  that  should  properly  have  a  place  in  a  more 
comprehensive  survey.  He  has  decided  to  depart  from 
custom  and  to  treat,  not  individual  writers  or  small 
groups  of  them,  but  only  those  currents  of  thought  as  a 
whole  which  differ  in  fundamentals,  and  have  long  since 
been  recognised  as  of  primary  importance  in  the  de- 
velopment of  political  economy.  For  this  reason  all 
systems  have  been  reduced  to  four,  and  each  system 
furthermore — with  the  exception  of  Historism — has  been 
subdivided  into  two  parts,  the  first  dealing  with  the  pre- 
suppositions that  were  borrowed  from  philosophy,  logic, 
ethics  and  psychology,  and  the  second  with  definitions  and 
laws  such  as  have  always  formed  the  main  body  of  eco- 
nomic doctrines.  It  will  be  found,  of  course,  that  this 
necessitated  an  overlapping  of  periods,  besides  at  times 
making  difficult  the  decision  as  to  the  division  to  which  a 
writer  should  be  assigned,  considering  the  scope  of  his 
ideas  and  several  modes  of  approach.  But  on  the  other 
hand,  such  a  simplification  has  a  distinct  pedagogical 
value,  provided  we  aim  at  an  outline  sketch  rather  than  at 


vi  PREFACE 

a  complete  picture,  whose  details  detract  so  often  from  the 
principal  theme. 

In  the  belief  that  quotations  are  appropriate  whenever 
the  text  treats  of  new  facts  or  involves  a  re-intcrpretation 
of  old  facts,  excerpts  from  many  sources,  both  of  economic 
and  of  non-economic  literature,  have  been  woven  into  the 
argument ;  but  it  is  hoped  that  this  will  prove  an  aid  to 
beginners  and  perhaps  stimulate  inquiry  into  the  sources 
themselves.  Indeed,  to  meet  the  interest  particularly  of 
college  students,  references  have  usually  been  added  in 
footnotes,  and  a  bibliography  is  provided  to  facilitate  a 
more  detailed  investigation  than  is  afforded  by  general 
histories  of  the  subject. 

In  conclusion,  the  writer  begs  leave  to  add  that  this 
review  was  originally  undertaken  preparatory  to  a 
critical  estimate  of  present  economic  theories,  of  their 
characteristics  and  possible  development — an  estimate 
that  he  expects  to  complete  in  the  near  future.  Such  a 
critique  he  deems  to  be  the  main  task  of  economists  today, 
and  he  would  consider  the  review  now  before  the  reader 
as  having  fallen  short  of  its  goal  if  it  did  not  help  him 
to  appreciate  some  of  the  perplexities  that  at  present 
confront  the  economist  both  here  and  in  Europe. 


TABLE  OF  CONTENTS 


CHAPTER  ONE  pages 

Introduction 1—15 

CHAPTER  TWO 
The  Premises  of  Naturalism 16—61 

CHAPTER  THREE 
The  Principles  of  Naturalism 62—91 

CHAPTER  FOUR 
The  Premises  of  Utilitarianism 92—142 

CHAPTER  FIVE 
The  Principles  of  Utilitarianism 143-184 

CHAPTER  SIX 
HiSTORisM  185-225 

CHAPTER  SEVEN 
The  Premises  of  Marginism 226—286 

CHAPTER  EIGHT 
The  Principles  of  Marginism 287—314 

CHAPTER  NINE 
Conclusion 315-328 


Bibliography .,      .      ,.,     .       .    S29-342 

Index 343-348 


CHARTS  AND  TABLES 

CHARTS 

PAGE 

Chart  One:  Genealogy  of  British  Utilitarianism  .  48 
Chart  Two:  Genealogy  of  Social  Science  ....  60 
Chart  Three:    Sources  of  John  Stuart  Mill's  Psychology     135 

TABLES 

Table  One:     Characteristics  of  Smithian  and  Ricardian 

Economics  Compared 114 

Table  Two:  Order  of  Treatment  of  Main  Subjects  in 
Representative  Treatises  on  Economics  Since 
1776 152-153 

Table    Three:     Main    Doctrines    of    the    Founders    of 

Marginism  Compared 232—235 

Table  Four:  Space  Assigned  to  Special  (Applied) 
Problems  in  American  Treatises  on  Economics 
since  1820 SIS 


THE  DEVELOPMENT  OF 
ECONOMICS 


CHAPTER  ONE 
INTRODUCTION 

The  Genetic  Viewpoint. — There  is  a  history  for  nearly 
over^^thing  because  hfe  is  more  than  an  arithmetical 
proposition.  If  our  experience  consisted  merely  of  an 
adding  or  subtracting  of  magnitudes  perfectly  definite 
and  comparable,  it  might  have  the  merit  of  simplicity, 
but  few  would  like  its  monotonous  course.  What  gives 
spice  to  life  is  variety,  and  one  principal  test  of  variety 
is  the  difficulty  we  find  in  trying  to  equate  things.  When 
many  kinds  of  elements  must  be  correlated,  when  inter- 
action is  more  than  a  parallelogram  of  forces  as  me- 
chanics knows  it,  then  events  take  place  which  are  the 
very  essence  of  History. 

History  deals  with  processes  in  time,  or  perhaps  is 
time  itself,  because  it  consists  of  changes  by  which,  in 
the  last  analysis,  time  becomes  measurable.  Each  indi- 
vidual makes  his  own  history,  since  his  experiences  are 
largely  of  different  sorts  and  cannot  be  put  together 
like  the  components  of  a  sum.  We  associate  history  with 
larger  groups  only,  because  we  ascribe  to  them  an  im- 
mortality which  is  not  really  theirs.  For  the  members 
of  any  group,  however  mighty,  die  in  due  time;  what 

1 


2         THE  DEVELOPMENT  OF  ECONOMICS 

survives  is  a  set  of  relations  with  which  we  have,  con- 
sciously or  unconsciously,  identified  that  group.  Con- 
sequently the  history  of  a  nation  offers  interesting  ma- 
terial for  study,  each  of  us  seeing  a  part  of  his  self  re- 
flected in  the  personality  of  the  whole.  Yet,  whether  we 
write  autobiography  or  universal  history,  the  fundamen- 
tal fact  is  always  that  of  change.  The  older  we  grow, 
the  greater  the  fund  of  facts  for  a  narrative,  the  more 
noticeable  the  transiency  of  things,  thoughts,  structures 
and  functions.  Nothing  proves  to  be  quite  permanent. 
All  items  are  subject  to  revision  and  destruction.  Rela- 
tive values  alone  can  be  established,  except  that  the  notion 
at  least  of  an  absolute  must  exist  if  its  opposite  is  to 
become  logical. 

Both  science  and  common  sense  have  turned  increas- 
ingly during  the  last  century  to  this  aspect  of  relativism. 
Not  autocracy  but  democracy,  i.  e.,  rights  and  duties 
properly  related  to  common  ends,  not  universalism  but 
the  territorial  origin  of  laws  and  ideals,  not  transcen- 
dental realities  that  experience  will  never  prove,  but 
knowledge  born  of  the  senses  and  variable  with  person, 
time,  and  place;  not  isolation  for  self-sufficient  individ- 
uals, but  interrelations  which  make  each  one  an  integral 
part  of  a  larger  whole — such  are  the  modern  contrasts 
that  make  clear  the  issue  of  absolutism  versus  relativism. 
The  question  is  not  whether  ideals  may  exist  or  pictures 
be  imagined  that  reach  beyond  the  world  of  sense,  but 
whether,  so  far  as  the  past  has  shown,  our  constructs  are 
imperishable,  our  standards  eternally  the  same,  our 
applications  successful  according  to  plans.  And  here 
the  answer  is  as  unequivocal  as  it  is  easy:  the  whole  his- 
tory of  thought  testifies  to  tlie  relativity  of  our  under- 
standing. Nothing  is  quite  certain.  Nothing  holds  good 
for  more  than  a  time.     The  truths  that  have  been  recog- 


INTRODUCTION  3 

nized*from  the  beginning  of  civilization  and  cherished  ever 
since  as  axiomatic  are  few  indeed.  In  relations  with  our 
fellowmen  certain  needs  and  reactions  may  be  said  to 
prove  the  constancy  of  human  nature;  but  even  here  our 
records  are  incomplete. 

The  historical  standpoint  therefore  is  natural  enough. 
It  must  always  puzzle  the  student  of  science  that  the 
relativity  in  time  and  space  of  all  human  values  was  so 
late  in  being  built  into  a  comprehensive  theorem.  Where 
change  is  so  universal  and  persistent,  how  could  men  fail 
to  grasp  the  principle  while  noting  the  facts?  The 
Orientals  and  the  Greeks  of  course  had  known  both  in  a 
general  way,  but  a  definite  formulation  with  conclusions 
to  guide  us  in  our  quest  for  truth  did  not  come  until  very 
recently. 

The  historical  viewpoint  is  now  only  a  species  within 
the  genus  Genetics.  The  genetic  outlook  comprises  the 
sum  total  of  changes  about  us,  while  the  historian  devotes 
himself  particularly  to  the  elucidation  of  human  activi- 
ties and  judgments.  What  is  true  of  the  cosmos  is  proven 
to  be  doubly  applicable  to  man,  namely,  that  change  is  a 
rule  without  exceptions.  Change  as  motion  and  inter- 
action in  the  physical  and  chemical  world.  Change  as 
metabolism,  growth,  and  decay.  Changes  of  habits  and 
opinions,  manners  and  wishes  and  needs.  Changes  of 
which  only  the  scientist  can  become  convinced,  because 
they  take  place  so  slowly  that  the  senses  will  not  per- 
ceive them.  Changes  in  flora  and  fauna,  of  earth  and 
the  cosmos,  and  of  man  whose  records  more  especially 
interest  us.  Everywhere  the  same  law,  A  becoming, 
waxing,  and  waning.  A  series  of  stages  more  or  less 
open  to  inspection.  Continuity  amid  variations.  Differ- 
ent rates  of  change,  and  overlappings  as  between  different 
fields  of  action,  but  always  a  binding  link,  a  correlation 


4         THE  DEVELOPMENT  OF  ECONOMICS 

traceable  after  due  inquiry,  a  possibility  of  explaining 
how  and  when  and  where  the  modifications  affected  the 
object  in  question,  our  beliefs  and  customs,  our  sciences 
and  religions,  our  modes  of  living  and  public  policies. 
The  genetic  principle  proves  equally  fruitful  whether  we 
study  creed  or  deed,  things  or  thoughts,  politics  or 
economics. 

History,  then,  has  value  even  though  we  deny  its  appli- 
cation to  ethics.  The  lesson  may  not  be  one  to  guide 
our  future  conduct  or  to  suggest  formulae  which  science 
by  itself  cannot  frame.  But  nevertheless  there  are  advan- 
tages in  sight.  For  whether  history  is  written  simply 
to  tell  how  things  really  happened, — as  Leopold  von 
Ranke  said, — or  whether  we  hope  from  the  beginning  to 
shed  light  on  the  present  by  scanning  the  records  of  the 
past,  the  benefit  remains  the  same.  Information  is  ours 
in  both  cases.  The  use  to  which  we  put  it  is  no  concern 
of  the  historian,  though,  to  be  sure,  it  is  a  foregone 
conclusion  that  a  valuation  of  some  sort  has  occurred. 
For,  in  the  words  of  the  poet : 

"My  friend,  the  times  gone  by  are  but  in  sum 
A  book  with  seven  seals  protectee' 
What  spirit  of  the  times  you  call 
Good  Sirs  is  but  your  spirit  after  all 
In  which  the  times  are  seen  reflected." 

It  is  practically  impossible  to  speak  of  the  past  without 
putting  into  it  something  of  the  present.  Retrospects 
necessarily  are  partly  prospective.  As  we  look  forward 
or  around  us,  we  behold  times  gone  by,  whose  life  becomes 
intelligible  only  as,  at  one  point  or  another,  it  connects 
with  our  own.  Historians  consequently  dare  not  hope 
to  be  mere  assemblers  of  facts,  even  if  they  wished  to. 
The  fact  itself  is  little  or  nothing,  the  interpretation 
much  or  everything.     The  value  put  upon  events  of  the 


INTRODUCTION  6 

past  is  the  core  of  historiography.  By  consulting  human 
nature  we  are  enabled  to  reconstruct  the  motives  and 
materials  of  an  earlier  epoch,  but  though  this  reasoning 
from  analogy  will  always  be  at  the  bottom  of  historical 
research,  the  externals  of  life  vary  sufficiently  to  influ- 
ence us  to-day  when  we  rehearse  the  happenings  of  yester- 
day. The  present  arose  out  of  the  past,  which  may  help 
to  explain  the  former.  To  judge  rightly  on  the  faults 
or  merits  of  existing  institutions  we  must  follow  them 
back  to  their  sources  and  intermediate  stations.  All  this 
harmonizes  with  our  modern  habit  of  prefacing  a  critique 
of  what  is  with  a  review  of  how  it  came  into  being.  But 
we  are  at  the  same  time  to  remember  the  pragmatic  nature 
of  historical  research,  the  limited  value  of  any  attempt 
to  portray  faithfully  a  situation  no  longer  before  us. 
The  Economic  Interpretation  of  History. — The  founders 
of  socialism  helped  to  set  us  aright  in  this  matter 
by  their  blunt  assertion  that  history  becomes  explicable 
in  the  light  of  economic  conditions.  They  overlooked  or 
disparaged  the  power  of  existing  thoughts  and  prejudices, 
and  magnified  the  force  of  external  circumstances.  They 
said:  Yes,  you  can  find  out  just  exactly  what  people 
were  and  did  and  wanted  and  believed  at  any  given  period, 
but  you  must  first  study  the  economy  of  that  period. 
A  real  world  existed  then  as  now.  Your  knowledge  of 
it  may  be  pretty  definite,  and  true  to  things  as  they 
actually  were.  It  is  not  a  question  of  being  under  the 
sway  of  your  personal  notions  or  of  your  Zeitgeist,  but 
of  being  willing  to  look  for  solutions  where  alone  they 
reside,  in  the  modes  of  production  and  exchange  of  goods. 
Whatever  the  laws  or  the  philosophies  or  the  religions 
or  the  customs  of  the  time,  be  sure  to  connect  them  with 
the  economic  background,  and  do  it  so  that  the  causal 
relation  runs  consistently  from  the  latter  to  the  former. 


6        THE  DEVELOPMENT  OF  ECONOMICS 

For  the  economic  interpretation  of  history  is  the  only 
accurate  one.  No  other  can  suffice.  To  understand  the 
speculations  on  property  and  government  of  any  one 
epoch  relate  them  to  the  mode  of  living  of  its  people, 
to  their  social  organization  as  dictated  by  principles  of 
production.  Histories  of  thought  do  not  run  in  a  con- 
tinuous thread  from  one  century  to  the  next,  but  rather 
by  installments,  each  one  of  which  receives  its  stamp 
from  the  economic  substratum  whence  it  was  derived. 
Each  age — defining  it  as  a  particular  system  of  economic 
organization,  production,  and  distribution — has  its  own 
intellectual  peculiarities,  and  continuity  between  them 
will  appear  only  in  so  far  as  customs  or  creeds  gather 
a  momentum  that  carries  them  beyond  the  time  to  which 
they  properly  belong.  Principles  of  social  heredity 
therefore  cause  curves  of  thought  that  depart  somewhat 
from  economic  lines  of  division,  but  nonetheless  the  gen- 
eral principle  obtains. 

This  is  the  view  often  known  as  economic  determinism. 
If  one  had  to  accept  it,  a  historical  sketch  of  any  one 
science  would  be  impossible  without  constant  reference 
to  facts  which  the  specialist  might  master  perfectly,  but 
Xvhose  significance  for  the  scientist  in  question  it  would 
be  difficult  to  ascertain.  One  would  have  to  ask :  Which 
economic  data  should  be  made  to  bear  on  which  detail 
of  the  doctrines  under  examination,  and  who  is  to  judge 
for  both.'' 

Luckily,  however,  one  need  not  interpret  the  rule  too 
narrowly,  for  in  several  respects  authority  is  against  it. 
Men,  for  instance,  have  written  excellent,  illuminating, 
and  elaborate  histories  of  thought,  religion,  customs,  and 
other  phases  of  life  without  obeying  the  law  of  economic 
periods.  An  intimate  relation  between  creed,  conduct, 
and  condition  has  usually  been  shown  to  exist,  but  each 


INTRODUCTION  7 

one  has  had  significance  independent  of  the  other.  But 
furthermore,  in  the  testing  out  of  the  theorem  it  has 
become  evident  that  the  main  point  is  not  whether  cross - 
references  may  be  advisable  or  even  necessary — for  most 
historians  would  grant  so  much — but  whether  economic 
conditions  possess  a  causal  force,  an  exclusive  power  of 
explanation  without  which  all  else  remains  obscure.  And 
here  psychology  as  well  as  the  direct  evidence  of  facts 
has,  on  the  whole,  favored  the  opponent  more  than  the 
friend  of  the  Marxian  doctrine. 

For  if  psychology  proves  anything  it  proves  the 
incommensurability  of  ideas.  The  economic  interpreta- 
tion of  history  gives  us  to  understand  that  a  more  or 
less  fixed  ratio  exists  between  systematic  thought  and 
the  concrete  facts  of  economic  life.  Psychology,  how- 
ever, is  definite  in  declaring  the  flexibility  of  such  a  rela- 
tion, indeed  the  impossibility  of  establishing  any  ratio 
between  the  two  factors  involved.  Stimuli  from  without 
are  not  the  only  ones  to  consider.  Economic  circum- 
stances do  not  alone  act  upon  us.  One  stimulus  may  end 
in  several  responses,  and  one  response  may  have  to  wait 
upon  a  congeries  of  stimuli,  either  all  issuing  outside  of 
us,  or  partly  aroused  from  within.  Perception  is  a 
peculiar  compound  of  primal  elements  originating  in  sen- 
sation and  association.  A  chemistry  is  continually  going 
on  that  makes  unrecognizable  a  train  of  thought  if  we 
were  to  judge  it  merely  by  its  objective  origins. 

Consciousness  comprises  the  three  fundamental  proc- 
esses of  sensation,  selection,  and  retention.  An  idea,  as  we 
grow  from  babyhood  into  adolescence  or  old  age,  under- 
goes innumerable  changes  in  its  constituencies.  Inhi- 
bition is  increasingly  at  work.  We  select  only  a  few  of 
all  the  potential  excitants  around  us.  Percepts  conse- 
quently are  the  result  of  eliminations  as  well  as  of  addi- 


8        THE  DEVELOPMENT  OF  ECONOMICS 

tions  and  corrections,  of  shifting  in  stress  and  reassem- 
bling of  parts  into  a  variable  focus.  Invention  cannot 
be  measured  by  the  tangible  or  intangible  facts  of  wealth. 
Innovation  is  at  least  as  self-sufficient  as  production  of 
goods  outside.  What  new  thought,  what  new  ideal,  what 
new  application  will  spring  from  older  ones  due,  in  a 
sense,  to  certain  assignable  economic  facts,  no  one  can 
predict.  The  relation  between  these  forces  is  not  a 
quantitative  one  as  socialists  have  maintained.  And  for 
this  reason  economic  data  cannot  be  indispensable  to  the 
explanation  of  successive  emanations  of  the  mind.  Intel- 
lectual history  stands  on  its  own  ground.  Or  in  the  words 
of  a  competent  authority:  "The  movement  of  thought 
might  be  regarded  as  an  interaction  of  purposes  and 
environment,  each  of  which  in  some  measure  modifies  the 
other.  At  least  no  interpretation  and  no  improvement 
can  be  considered  as  a  discrete  event.  It  has  its  meaning 
in,  and  its  appearance  and  development  is  controlled  by, 
wider  mental  and  physical  contexts.  These  serve  to 
determine  the  nature  of  the  appreciation  and  to  give  the 
desire  that  leads  to  the  particular  improvements.  In  this 
way  the  progress  of  thought  is  one  continuous  operation. 
No  part  can  be  understood  unless  it  is  considered  with 
the  whole."  ^ 

There  are  objective  tests  for  this  contention  in  the 
annals  of  history  itself.  It  can  easily  be  shown  that  the 
religion  or  philosophy  of  an  age  may  vary  greatly  for 
different  nations  even  though  their  modes  of  production 
and  distribution  are  substantially  the  same.  Or  the  con- 
verse is  true,  since  with  quite  different  economic  con- 
ditions the  trend  of  thought  has  been  nearly  the  same 
for  all.  Any  comparison  of  acts  of  legislation,  meta- 
physical systems,  world  religions,  moral  standards,  and 

'  Pillsbury,  W.  B.     Psychology  of  Reasoning,  p.  286. 


INTRODUCTION  9 

literary  or  art  achievements  will  illustrate  the  principle. 
Or  one  might  watch  the  growth  of  ideas  in  an  individual 
from  boyhood  to  old  age.  The  conditions  of  work  and 
consumption  may  remain  constant,  but  the  accession  of 
ideas,  including  those  not  peculiar  to  the  given  general 
economic  environment,  will  go  on,  engendering  feelings 
and  characteristics  of  conduct  virtually  independent  of 
those  conditions. 

In  the  end,  however,  the  crux  of  the  question  lies  in 
the  definition  of  "economic"  and  of  "cause."  What 
precisely  is  meant  by  an  economic  fact?  In  what  sense 
can  anything  be  the  cause  of  something  else?  The 
answer  for  both  is :  We  know  only  by  definition,  that  is 
by  hypothesis.  An  economic  fact  is  not  an  isolated  indi- 
vidual any  more  than  any  other  circumstance.  We  are 
face  to  face  with  complexities  that  to  untangle  into  two 
elements,  the  economic  and  non-economic,  would  be  a 
trying  task.  We  accept  distinctions  because  they  serve 
to  emphasize  aspects  or  to  focus  our  attention  upon  par- 
ticular purposes ;  but  any  condition  such  as  that  of  pro- 
ducing a  bushel  of  wheat  involves  as  much  the  inter- 
action of  minds  in  all  their  powers  and  parts  as  a  belief, 
say,  in  the  Nicfean  Creed.  The  discoveries  of  science  are 
correlations,  and  not  causation  in  a  straight  line.  What 
experience  brings  out  continually  is  the  interdependence 
of  events,  not  their  growth  from  one  single  taproot  that 
might  feed  all  else.  We  can  tell  something,  but  not  every- 
thing, from  the  groundwork  of  a  structure;  neither  can 
we  infer  a  great  deal  as  to  the  foundations  by  studying 
the  upper  parts  alone.  Which  is  to  be  emphasized  in 
describing  the  building,  where  we  are  to  begin  and  how 
we  are  to  appraise  its  features,  depends  more  on  what 
we  expect  from  it  than  on  any  particular  class  of  mate- 
rials employed.     Histories  of  thought  for  these  reasons 


10      THE  DEVELOPMENT  OF  ECONOMICS 

have  been  written  again  and  again  free  of  economic 
allusions,  and  good  judges  have  approved,  so  long  as 
the  general  canons  of  historiography  were  not  lost  sight 
of.  Selection,  balance,  sequence,  clarity  and  force,  these 
have  ever  been  essentials.  The  interlacing  of  the  economic 
and  the  non-economic  must  be  left  to  the  student,  whose 
ipethods  will  doubtless  be  individualized  to  a  certain 
extent. 

Lessons  of  History. — What  history  however  does  show 
is  the  periodic  recurrence  of  an  optimistic  and  pessi- 
mistic attitude  toward  the  subject  under  investigation. 
One  soon  finds,  on  scanning  the  annals  of  intellectual 
development,  that  a  skeptical  turn  of  mind  becomes 
common  among  philosophers  when  certain  conditions  have 
been  fulfilled  that  do  not  prevail  equally  at  all  times. 
Constructive  and  destructive  periods  alternate.  A  criti- 
cal spirit  arises  when  maladjustment  of  savants  to  their 
subject  exceeds  a  given  point,  when  the  old  and  the  new 
in  beliefs  conflict,  when  needs  and  creeds  move  in  opposite 
directions  or  at  divergent  angles,  when  the  conclusions 
of  one  science  cease  to  harmonize  with  the  premises  of 
another.  Transition  periods  are  proverbially  scornful 
of  established  sanctions ;  or  should  we  say,  when  the  old 
proves  worthless  anything  novel  has  charms?  No  mat- 
ter. There  are  ascending  and  descending  epochs  of 
research.  We  have  pioneers  in  one,  and  iconoclasts  in  the 
next;  minds  who  answer  our  questions,  and  those  leaving 
nought  but  wreckage.  Mankind  at  large  does  what  indi- 
viduals must  do  now  and  then,  namely,  take  stock  of 
what  they  have  and  lack,  of  what  they  think  they  ought 
to  have.  Or,  to  change  the  metaphor,  mankind  and 
thinkers  in  particular,  are  like  travelers  on  a  long 
journey,  whose  goal  is  not  always  absolutely  certain, 
whose    maps    prove    unreliable,    whose    equipment    needs 


INTRODUCTION  11 

repairing  bit  by  bit,  whose  search  for  shortcuts  and 
easier  paths  may  be  rewarded,  but  also  frustrated.  There 
is  the  disposition  to  pause  and  ponder,  to  change  one's 
mind  or  to  see  the  Landscape  from  changing  standpoints ; 
and  this  influences  history  no  less  than  religious  con- 
versions. 

A  critique,  likewise,  may  turn  either  to  details  or  to 
cardinal  points  in  a  doctrine.  We  may  disagree  with 
the  conclusions  in  general  or  with  a  few  of  a  consider- 
able mass.  We  may  fail  to  see  the  validity  of  premises, 
or  detect  fallacies  in  deduction,  or  take  exception  to 
technical  devices  for  measurement  and  correlation. 
Where  verification  is  out  of  the  question  reasoning  is 
more  likely  to  be  scrutinized  closely  than  in  cases  that 
lend  themselves  readily  to  an  objective  test.  If  the  per- 
ceivable facts  about  us  belie  a  statement  of  science  it 
will  not  be  long  before  the  critic  has  made  his  point. 
Otherwise  a  more  arduous  duty  is  before  him.  Sciences, 
e.  g.,  claim  methods  in  part  peculiarly  their  own,  or  they 
rely  upon  premises  which  form  the  end  results  of  another 
group  of  inquiry.  The  instruments  for  computation  are 
perhaps  found  to  lack  more  than  the  accustomed  degree 
of  precision;  or  conclusions  and  premises  meet  with 
approval,  but  the  way  they  are  coupled  together  pro- 
vokes our  censure.  The  history  of  any  one  science  such 
as  economics  may  therefore  be  attacked  from  several 
points,  but  what  counts  finally  is  not  the  length  of 
argument  or  manner  of  exposition,  but  the  net  sum  of 
revisions  deemed  necessary.  Results  once  more  measure 
effort ! 

Now,  as  regards  the  science  of  economics,  the  critical 
approach  will  be  either  predominantly  practical  or  theo- 
retical; and  any  review  of  its  growth  is  likely  to  exhibit 
here  and  there  the  choice  made. 


12      THE  DEVELOPMENT  OF  ECONOMICS 

In  a  utilitarian  spirit  we  may  point  to  the  existing 
socio-economic  evils,  of  which  there  are  surely  enough, 
and  ask  whether  they  are  an  unavoidable  part  of  prog- 
ress at  any  given  stage,  or  chiefly  the  result  of  mistakes, 
of  ignorance,  and  carelessness  that  will  automatically 
correct  itself  as  soon  as  social  processes  are  studied  more 
earnestly  than  they  have  been  up  to  date.  In  recent 
years  of  course  students  of  these  phenomena  have  been 
given  a  hearing  and  somewhat  of  a  chance  to  test  the 
applicability  of  their  doctrines.  People  have  been  will- 
ing, in  growing  number,  to  accept  the  opinion  of  special- 
ists. However,  on  the  other  hand,  the  skeptical  attitude 
has  always  seemed  natural  because  of  the  elusive  charac- 
ter of  so  much  that  is  important  in  social  investigation. 
Men  have  despaired  of  getting  light  on  their  practical 
questions  by  going  to  the  theorist.  The  prevailing  note 
has  been:  Economics  has  been  over-confident,  not  to  say 
over-pretentious  and  officious.  Evils  will  continue  to 
exist  because  no  rationale  of  meliorism  will  ever  be  found, 
because  there  is  no  such  thing  as  a  scientific,  systematic 
way  of  improving  the  lot  of  mankind.  Progress  is  real, 
but  it  cannot  be  forced.  Economics,  therefore,  has  been 
a  failure  and  will  go  on  failing  in  so  far  as  legislation 
must  designedly  ignore  it.  Rough  estimates  alone  are 
possible.  A  knowledge  of  human  nature  gained  at  first 
hand  is  safer  than  any  amount  of  abstraction  offered 
by  experts. 

Scientists,  however,  will  not  dismiss  the  subject  so 
lightly.  To  them  the  theoretical  approach  to  any 
critique  of  their  work  or  that  of  another  is  the  only  one 
worth  while.  As  they  see  it,  the  important  tiling  is  not 
an  assigning  of  guilt  or  an  acquittal  from  a  moral  stand- 
point, but  a  probing  into  data,  methods,  and  conclusions 
so  far  as  a  science  has  reached  any.     The  ever  repeated 


INTRODUCTION  13 

query  is :  Do  the  principles  enunciated  square  with  the 
facts?  Do  they  reflect  the  best  knowledge  of  the  day 
in  allied  fields  of  research?  Do  they  rest  on  sound  reason- 
ing and  a  correct  use  of  hypotheses?  As  to  the  now  domi- 
nant economic  system,  for  instance,  is  it  self-consistent 
and  fashioned  out  of  materials,  with  the  help  of  premises, 
that  meet  our  experiences  where  they  are  available?  And 
so  far  as  the  premises  are  concerned,  on  which  hinges  so 
much,  do  they  substantially  agree  with  the  verdict  of  the 
science  whence  they  were  taken,  or  are  readjustments  and 
cancellations  in  order? 

It  is  undoubtedly  true  that  some  sciences,  in  spite  of 
the  revisions  found  necessary  from  time  to  time,  have 
nonetheless  a  residuum  that  is  continuous  and  as  near 
axiomatic  as  experimental  methods  can  make  them ;  while 
the  social  scientist  or  the  philosopher  treats  of  questions 
apparently  never  settled.  The  revaluation  is  partial  in 
one  case,  and  complete  in  the  next.  The  alterations  occur 
seldom  in  the  first  instance,  separated  by  long  intervals 
of  time,  and  frequently  in  the  next  where  one  viewpoint 
seems  as  legitimate  as  a  second  and  third.  How  are  we 
to  explain  this  difference,  how  to  remove  it  if  we  can, 
how  to  accept  it  and  yet  feel  entitled  to  the  most  serious 
consideration  by  outsiders?  The  question  is  as  old  as 
it  is  possibly  unanswerable,  but  a  severely  critical  attitude 
toward,  e.  g.,  economics  must  reckon  with  it  sooner  or 
later. 

The  larger  issue  raised  a  while  ago  takes  on  therefore 
a  more  engaging  aspect.  One  is  constrained  to  inquire 
just  exactly  what  science  is  anyway,  what  the  tests  for 
any  one,  what  the  limits  within  which  methods  or  applica- 
tions may  vary.  The  liistory  of  economics  abounds  in 
attempts  to  find  a  solution  of  this  proljlem.  From  the 
outset  men  have  sought  to  prove  the  scientific  nature  of 


14       THE  DEVELOPMENT  OF  ECONOMICS 

economics,  to  formulate  definite  laws  of  much  breadth  of 
operation  and  lasting  value.  The  idea  of  law  has 
engrossed  pliilosophers  and  social  scientists  more  per- 
haps than  the  investigators  who  have  furnished  the  bulk 
of  our  scientific  information.  Again  and  again  leading 
economists  have  expatiated  on  the  inward  nature  of  social 
regularities,  on  means  and  ways  for  getting  at  them, 
on  initial  steps  by  which  a  deductive  or  inductive  mode 
of  inference  should  assure  us  permanent  fruits.  To  find 
truths  independent  of  a  single  system  of  production  or 
exchange,  to  make  applicable  to  all  nations  what  the  life 
of  any  one  revealed,  to  bring  under  a  single  central  theme 
the  richest  variety  of  phenomena,  all  this  has  been  the 
ambition  of  a  Smith,  Mill,  Carey,  and  Jevons.  Nothing 
was  neglected  to  make  conclusive  the  argument  brought 
before  the  reader.  The  whole  range  of  topics,  once  the 
sphere  par  excellence  of  philosophy,  was  scanned  in  order 
to  find  unity  amid  diversity.  Thus  a  history  of  economics 
has  to  deal  incidentally  with  questions  not  turning  on 
price,  distribution,  or  production.  The  founders  culti- 
vated a  broad  viewpoint.  They  strove  to  get  at  the  roots 
of  an  ultimate  problem  of  prosperity,  explaining  not 
merely  why  supply  and  demand  are  equalized,  but  how 
the  weal  of  mankind  might  be  deliberately  fostered.  In 
other  words,  pragmatic  and  purely  theoretical  aspects 
were  never  separated  completely.  It  was  a  persistent 
search  for  ultimates  rather  than  for  values  immediately 
at  hand. 

Hence  the  recurrent  inquiry  into  what  is  fact  and  what 
fancy,  what  the  relation  between  things  and  thought,  what 
the  control  exercisable  by  mind  over  matter.  Economists 
from  time  to  time  made  these  queries  basic  to  others. 
They  wished  to  know  what  reality  was,  what  the  nature 
of  control  or  of  causation,  of  law  and  will,  of  truth  and 


INTRODUCTION  15 

virtue,  and  the  relation  of  one  to  the  next.  The  Is  and 
the  Ought,  repetition  in  history  and  possibilities  of  prog- 
ress, such  and  like  fundamentals  were  touched  upon  by 
men  whose  nearby  field  was  wealth  and  income.  A  critic 
of  economics  in  its  present  condition  must  take  cog- 
nizance of  these  speculations,  and  the  historian  must 
record  them  if  his  survey  is  to  have  a  perspective. 


CHAPTER  TWO 
NATURALISM 

I.  Antecedents 

The  Birth  of  Science. — The  study  of  economic  sub- 
jects is  no  doubt  almost  as  old  as  the  history  of  man- 
kind. It  may  safely  be  conjectured  that  men  could  not 
reach  a  high  degree  of  civilization  without  busying  them- 
selves with  the  pros  and  cons  of  the  manner  of  their 
living,  of  the  sources  of  their  weal  and  woe,  of  the  ways 
and  means  available  for  improving  their  lot — all  of  which 
topics  are,  in  their  very  nature,  economic.  What  is 
more,  we  know  that  economic  regulations  had  already 
become  quite  comprehensive  in  early  Bab3'lonian  days, 
to  say  nothing  of  the  meritorious  part  played  by  Greeks 
and  Romans  long  before  the  advent  of  the  Christian  era. 

If  however  we  wish  to  find  the  beginnings  of  economics 
a^  a  science  we  need  not  go  back  as  far  as  antiquity,  nor 
even  much  beyond  the  middle  of  the  eighteenth  century. 
For  the  astonishing  revival  of  economic  thought  that 
characterized  the  period  of  1500  to  1750  was  rot  accom- 
panied so  much  by  definite  attempts  at  systematizing 
results,  as  by  marked  additions  of  knowledge  on  a  variety 
of  subjects,  part  of  it  being  given  a  universal  value, 
but  most  of  it  bearing  on  problems  of  national  policy. 
Strictly  speaking  these  studies  of  Kameralists  and  Mer- 
cantilists lacked  a  scientific  character  because  the  thought 
had  not  yet  dominated  them  that  social  processes  follow 
laws,  and  admit  of  measurement  or  deductive  treatment 

16 


NATURALISM  17 

exactly  as  physicists  had  reduced  their  own  manifold  to 
a  few  grand  principles  of  matter  in  motion.  Only  with 
the  appearance  of  the  Physiocrats  does  economics  cease 
to  be  a  loose  bundle  of  individual  facts.  Now  for  the 
first  time  a  unifying  code  is  sought  and  proclaimed  to 
exist.  Now  surveys  are  made  and  theorems  submitted  for 
others'  approval  which  overshadow  whatever  significance 
may  be  attached  to  the  earlier  literature. 

Still,  it  would  be  a  mistake  to  ignore  the  great  impetus 
given  to  economic  studies  by  the  period  of  transition  from 
medieval  to  modern  times.  The  great  bulk  of  our  modern 
exact  knowledge  can  be  traced  back  to  this  period  of  re- 
awakening and  searching  whose  advent  had  been  so  long 
prepared,  and  whose  ultimate  achievements  so  completely 
transformed   the   world. 

During  the  Middle  Ages  nothing  had  been  as  firmly 
rooted  in  the  minds  of  people  as  the  need  and  goodness 
of  authority.  Tlie  guiding  slogan  of  leaders  was  faith 
and  submission.  Authority  was  everything  because  its 
chief  purpose  had  been  announced  in  the  Scriptures,  and 
its  sole  oracle  was  the  papacy — with  all  that  that  term 
implied.  Authority  of  course  has  always  existed  and 
can  therefore  not  be  mentioned  as  a  peculiar  feature  of 
the  so-called  Dark  Ages.  What  was  a  distinguishing 
mark  was  the  acceptance  of  authority  even  when  the  evi- 
dence of  the  sense  contradicted  it,  or  might  easily  have 
been  invoked  to  contradict  it.  Authority  in  all  matters, 
such  was  the  axiom  for  high  and  low.  It  was  not  a  case 
of  submitting  to  hearsay  because  its  teachings  had  been 
verified,  or  might  at  any  time  be  proven  correct  to  the 
satisfaction  of  doubters,  but  rather  of  extending  the 
mandates  of  theology  to  other  questions  where  tests  might 
naturally  suggest  themselves. 

The  Middle  Ages  therefore  stood  for  the  maintenance 


18      THE  DEVELOPMENT  OF  ECONOMICS 

of  a  status  quo  as  nearly  as  the  practical  and  spiritual 
interests  of  Church  or  State  advised  it.  The  illiteracy 
of  the  masses  was  as  much  a  help  for  preserving  order  as  a 
hindrance  to  the  dissemination  of  knowledge.  The  Holy 
Roman  Church  and  the  Holy  Roman  Empire  worked 
hand  in  hand  to  fortify  their  creed  of  submission.  Pa- 
tristic literature  and  papal  decrees,  the  Bible  as  officially 
placed  at  the  disposal  of  the  priesthood,  the  verdicts  of 
Ecumenical  Councils,  and  the  codifications  of  law  and 
dogma  by  great  scholars  like  Gratian  and  Thomas 
Aquinas — such  were  the  repositories  of  creed  that  none 
were  permitted  to  impugn,  whose  power  remained  sub- 
stantially  intact   for   nearly   a    thousand    years. 

Of  ancient  writers  Plato  most  enjoyed  the  esteem  of 
the  hierarchy  until  the  twelfth  century.  After  that 
Aristotle  gained  favor  with  the  clergy,  and  even  more 
with  many  of  the  secular  students  who  now  congregated 
around  universities  or  pursued  their  studies  independent 
of  official  recognition,  content  to  search  truth  without 
encouragement,  somewhat  in  the  spirit  of  heroes  and 
heretics.  For  the  most  part  a  foreign  medium  inter- 
vened between  author  and  pupil.  The  Greeks  were  inter- 
preted through  Arabians  whose  commentaries  won  great 
fame.  Roman  works  not  infrequently  circulated  in 
medieval  Latin,  a  variant  and  mutilation  of  the  Cice- 
ronian language.  Studies  from  the  sources  were  as  rare 
as  they  were  held  unnecessary  to  a  correct  appreciation 
of   ancient   thought. 

In  fact,  learning  was  not  in  any  case  a  virtue  of 
fundamental  importance.  Not  knowledge  but  faith  was 
the  guarantee  to  salvation.  The  needs  of  the  soul  had 
no  relation  to  the  inclinations  of  the  body  or  of  an  active 
mind.  Asceticism  ranked  high  because  to  forego  things 
seemed  more  wholesome  than  to  demand  things.     Suffer- 


NATURALISM  19 

ing  in  a  measure  took  the  place  of  service.  To  undergo 
tortures  might  benefit  man  more  than  to  enjoy  comforts. 
The  value  of  this  life  on  earth  consisted  in  its  oppor- 
tunities for  purifying  the  soul,  for  ridding  sinners  of 
their  handicaps  in  a  quest  for  the  eternal  life  to  come. 
What  the  priest  did  was  consequently  more  important 
than  the  guidance  of  teacher  or  legislator,  although  the 
Church  did  support  both,  and  indeed  was  throughout  the 
Dark  Ages  the  prime  agency  for  enlightenment  and 
moral  uplift. 

After  the  thirteenth  century,  however,  the  Church  was 
undergoing  a  decline.  Just  as  the  authority  of  mon- 
archs,  dukes,  and  barons  suffered  at  the  hands  of  a 
rebellious  bourgeoisie  whose  fate  seemed  bound  up  in- 
separably with  economic  and  legal  liberties,  so  the  hier- 
archy found  insuperable  difficulties  in  trying  to  curb 
skepticism.  A  new  view  of  life  was  being  crystallized. 
A  turn-about  of  opinions  and  purposes  took  place  which, 
by  the  sixteenth  century,  had  definitely  conquered  the 
medieval  order.  Principles  were  now  being  announced 
that  could  not  but  overthrow  hallowed  customs.  The 
center  of  interest  shifted,  so  that  in  the  end  a  series  of 
problems  came  to  the  fore,  the  solution  of  which  was  part 
of  the  task  assigned  to  economics. 

This  rebirth  of  an  older  philosophy,  this  Renaissance, 
as  it  has  fitly  been  christened,  began  in  the  first  place 
with  an  enthusiastic  movement  for  the  exploration  of 
pagan  antiquities.  Greek  and  Roman  civilization  now 
more  than  ever  preoccupied  the  minds  of  plodding  stu- 
dents. Barbarism,  instead  of  being  associated  with 
heathenism,  now  came  to  mean  ignorance  of  pre-Chris- 
tian culture.  Humanists  these  protagonists  of  pagan 
ideals  styled  themselves.  Humanism  breathed  a  cosmo- 
politan spirit  like  Catholicism,  but  unlike  this  latter  it 


20       THE  DEVELOPMENT  OF  ECONOMICS 

stressed  worldliness  and  individual  rights.  Unlike  me- 
dieval learning  that  of  the  Renaissance  centered  on  a 
bold  appreciation  of  the  immediate  environment,  of  human 
nature  in  all  its  phases,  of  possibilities  for  material  ad- 
vancement and  artistic  elevation  such  as  men  have  culti- 
vated ever  since. 

Studies  from  the  source  now  became  tests  of  scholarly 
worth.  One  need  only  compare  the  writings  of  a  Reuchlin 
or  Erasmus  or  Thomas  More  or  Machiavelli  with  the 
best  of  medieval  books  to  be  impressed  with  the  difference 
of  outlook.  What  an  abundance  of  citations  from  the 
Ancients !  What  a  zest  for  learning  regardless  of  its 
religious  implications !  What  effervescence  of  spirit  and 
lightness  of  heart,  what  daring  of  conception  and  faith 
in  mankind's  earthly  destinies !  Verily,  men  had  sloughed 
off  the  garb  of  repentance;  the  joy  of  life  bade  them 
search  and  act,  to  speak  without  fear  and  to  urge  new 
works  whose  merit  it  would  be  for  everybody  to  put  to 
a  test. 

Petrarch  had  opened  the  new  era  with  his  sonnets  and 
hymns  to  the  beauty  of  nature.  However  near  he  was 
to  Dante  in  point  of  time,  his  temper  was  of  a  very 
different  age,  of  times  then  only  in  the  budding,  but 
foreordained  to  find  magnificent  expression  in  the  litera- 
ture of  the  Tudors,  in  French  literature  under  the 
Bourbons,  and  in  the  outbursts  of  Italian  poets  and 
essayists  from  Genoa  to  Venice.  Worldliness  in  paint- 
ing and  architecture,  in  music  and  sculpture,  in  Erasmus' 
"Praise  of  Folly"  where  knaves  prove  honest,  in  Sir 
Thomas  More's  "Utopia,"  and  in  monuments  of  scien- 
tific endeavor!  A  symptom  indeed  of  the  times,  these 
Utopias  of  many  forms  and  intents  that  issued  from  the 
press  between  1500  and  1700!  How  novel  tlie  idea  that 
men    should    concern    themselves    with    their    frames    of 


NATURALISM  21 

government,  with  economic  conditions,  manners  and 
customs,  with  modes  of  material  living  and  the  apportion- 
ment of  rights  and  duties  among  the  members  of  society ! 
It  seemed  forsooth  as  if  Alexander  Pope  had  aptly  sum- 
marized— in  a  sort  of  finale — this  motto  of  the  Renais- 
sance, when  he  wrote: 

"Know  thyself^  presume  not  God  to  scan; 
The  proper  study  of  mankind  is  man." 

(Essay  on  Man,  1732.) 

Perfectibility  of  human  nature,  as  the  eighteenth  cen- 
tury spoke  of  it,  could  be  seriously  preached  and  at- 
tempted once  it  was  understood  that  nothing  mattered 
as  much  as  the  attainment  of  happiness  and  creature  com- 
forts by  man  while  still  on  earth.  The  distant  future 
might  then  perhaps  be  supposed  to  take  care  of  itself. 

Yet  it  is  well  knov^^n  that  Humanism  was  only  the 
opening  act  in  the  longer  drama.  For  the  same  rebirth 
that  inspired  a  Melanchthon  and  Linacre  also  gave  rise 
to  the  Reformation,  to  a  moral  house-cleaning  on  a  vast 
scale,  and  to  economic  and  intellectual  enterprises  unique 
in  the  annals  of  history. 

The  Protestant  revolt  to  be  sure  had  an  economic 
background  as  many  a  historian  has  taken  pains  to 
elucidate.  However,  there  was,  on  the  other  hand,  a 
purely  spiritual  opposition  to  papal  dominion,  a  grow- 
ing feeling  that  creeds  had  outlasted  their  usefulness, 
a  determination  on  the  part  of  earnest-minded  thinkers 
to  subject  to  a  crucial  test  the  doctrines  transmitted  to, 
not  to  say  foisted  upon,  them  by  earlier  generations. 
The  Protestant  revolution  therefore  may  serve  as  an 
example  of  the  forces  that  furthered  the  cause  of  social 
science,  since  together  with  much  conservatism  it  popu- 
larized the  idea  of  personal  worth  and  effort.     At  bottom 


22       THE  DEVELOPMENT  OF  ECONOMICS 

the  theological  creed  remained  metaphysical  and  unadapt- 
able to  scientific  formulje.  An  astonishing  amount  of  the 
old  verbiage,  ritual,  and  dogma  was  retained  as  essential 
to  human  progress.  Just  as  Aristotelianism  died  slowly 
among  Humanists  and  philosophers,  outliving  the  six- 
teenth century,  so  Christian  dogmatism  showed  sufficient 
vitality  in  its  Protestant  dress  to  compete  with  rational- 
ism and  science  for  a  place  in  the  minds  of  men.  Religion 
still  was  synonymous  with  an  orthodoxy  unknown  to  the 
synoptics.  Yet,  should  it  be  doubted  that  the  advantages 
outweighed  the  cost?  That  the  return  to  the  Bible  as 
the  source  of  religious  truth,  that  the  insistence  upon 
Justification  by  Faith  as  the  sole  condition  to  redemption, 
that  the  nation-wide  movements  for  moral  regeneration, 
that  all  this  marked  a  decided  step  in  advance?  The 
Enchiridion  of  Erasmus  not  inappropriately  was  pub- 
lished at  the  turn  of  the  fifteenth  century.  From  there 
on  admonishments  came  plentifully,  the  clergy  furnishing 
most  usually  the  occasion,  but  the  laity  not  forgetting  its 
own  duty  in  the  campaign  for  betterment.  Puritanism 
and  the  Counter-Reformation  among  the  Catholics,  Pres- 
byterian zeal  and  Quaker  simplicity,  such  are  but  inci- 
dents in  a  wave  of  idealism  which  helped  to  balance  men 
when  epoch-making  discoveries  unthroned  old  rules  and 
rulers. 

Conservatism  and  radicalism  were  strangely  mixed  in 
reformers  like  Luther  and  Melanchthon,  in  Cusanus  and 
Kepler  among  scientific  leaders.  A  bewildering  variety 
of  philosophical  tendencies  is  noticeable  during  this  time. 
The  old  and  tlie  new  were  companions  as  often  as  adver- 
saries fighting  for  dear  life.  But  on  the  whole  the  inno- 
vators had  tlie  best  of  it.  Pioneers  had  not  battled  in 
vain.  Tlie  sacrifices  made  by  earlier  champions  of 
liberty  and  light  gradually  bore  fruit.     Much  time  had 


NATURALISM  23 

passed  since  Wycllf*s  death  in  1384),  but  the  interval  had 
also  given  strength  to  the  individualists.  Spinoza  could 
write  in  an  liistorical  spirit  that  would  have  amazed  even 
the  first  translator  of  the  Bible  into  English.  Authority 
after  all  had  been  shaken.  It  was  possible  now,  at  the 
beginning  of  tlie  seventeenth  century,  to  lay  down  prin- 
ciples, that  dealt  a  death-blow  to  many  medieval  canons  of 
truth. 

Nowhere  did  the  drift  of  the  Renaissance  find  more 
unequivocal  expression  than  in  the  rise  of  science  and 
modern  philosophy.  Nowhere  were  the  precepts  of  intel- 
lectual progress  proclaimed  so  fearlessly,  so  ruthlessly, 
as  in  the  works  of  scientists  who  yearned  to  uncover  the 
secrets  of  nature.  Galileo  Galilei  was  the  arch-type  of 
this  new  school  of  thinkers.  His  cardinal  rules  that 
science  must  forever  labor  independent  of  authority,  and 
that  nothing  will  answer  but  personal  observation  and 
experimentation  in  detail,  these  rules  set  a  standard  never 
yet  challenged  by  his  successors.  To  find  out  whether 
things  were  as  stated,  such  was  the  new  attitude.  To 
probe  into  matters,  lest  authorities  were  misunderstood 
or  themselves  deceived;  to  satisfy  the  senses  wherever 
possible  on  a  subject  of  science,  and  to  present  carefully 
the  evidence  which  was  used  to  support  a  scientific  gen- 
eralization, that  was  the  creed  to  which  all  could  subscribe 
as  long  as  facts  were  detached  from  faith.  Nothing 
should  stand  in  the  way  of  this  plan  for  action.  No 
opportunity  should  be  lost  to  enrich  human  knowledge. 
No  mystery  was  to  deter  men  from  inquiring,  or  to  lull 
them  into  the  supposition  that  God  had  meant  man  to 
be  ignorant.  Nay,  nature  would  be  an  open  book  if 
scientific  methods  moved  unimpeded.  All  experiences 
admitted  of  investigation.  Nothing  was  so  sacred  but 
that   a  quest   for   truth  might   justify   our  utilizing  it. 


24       THE  DEVELOPMENT  OF  ECONOMICS 

Hence  Vesalius  did  not  hesitate  to  dissect  the  human 
body  in  order  to  refute  Galen.  Hence  Descartes  could 
proudly  point  to  his  rabbits  as  his  best  books  for  the 
study  of  anatomy.  Hence  the  rapid  progress  made  in 
the  several  sciences,  in  botany  and  physiology,  in  human 
anatomy  and  in  physics,  in  astronomy  and  in  mathe- 
matics where  important  discoveries  resulted  from  needs 
for  a  precise  calculus  of  matter  in  motion.  Instruments 
like  the  microscope  and  the  telescope  aided  powerfully 
of  course  in  certain  fields,  but  it  was  the  venture  of  the 
student  rather  than  his  employment  of  apparatus  that 
brought  unparalleled  successes.  It  was  the  spirit  of 
the  Renaissance,  in  brief,  that  gave  us  a  new  cosmology 
and  a  new  philosophy  whose  by-paths  ultimately  led  to 
the  systematic  study  of  social  events. 

Environmental  Changes. — Instincts  and  ideas  may  be 
considered  the  chief  social  forces,  even  though  the  ex- 
ternal environment  accounts  for  much,  even  though  any 
phrase  like  "social  forces"  is  only  a  metaphor,  which  begs 
a  question  that  science  has  never  yet  answered.  How- 
ever, it  is  not  to  be  denied  that  changes  other  than  those 
of  creed  or  philosopliy  or  scientific  knowledge  helped  to 
complete  the  revolution  pictured.  Assuredly  one  may 
mention  again  the  invention  of  gunpowder  and  of  print- 
ing, and  the  use  of  the  compass  as  notable  parts  of  the 
general  metamorphosis.  Gunpowder  helped  to  destroy 
the  medieval  political  order;  printing  facilitated  the 
education  of  the  masses,  besides  furnishing  experts  with 
a  means  for  preserving  their  latest  cogitations  ;  and  the 
compass,  wlion  put  into  the  hands  of  a  courageous 
mariner,  would  reveal  continents  not  suspected  by  the 
Ancients.  In  tliis  way  certainly  a  wonderful  enlarge- 
ment of  the  physical  world  was  made  possible.  Columbus, 
in   steering    for    Cathay,    guided    human    enterprise    into 


NATURALISM  25 

channels  of  trade  that  made  of  western  Europe  a 
world  market.  The  Mediterranean  shrunk  to  an  insig- 
nificant inland  lake.  But  the  treasures  of  the  Orient 
were  therefore  not  lost,  nor  had  any  change  of  trade- 
routes  ever  brought  such  wealth  to  man.  Enormous 
resources  exhibited  to  the  explorer's  eye!  Vast  lands 
thrown  open  to  emigrants  and  colonizing  governments. 
A  long  list  of  new  products  for  popular  consumption. 
Higher  levels  of  living,  better  housing  conditions,  more 
currency  and  a  growing  investment  fund,  such  were  inci- 
dental results  of  the  discoveries.  Bio-  and  agri-culture 
gained  by  the  contact  with  other  nations  as  well  as  by 
a  type  of  investigation  that  before  the  Renaissance  was 
unknown.  A  better  care  of  animals,  breeding  and 
domestication  of  foreign  varieties,  the  introduction  of  new 
fruits  and  vegetables,  selection  and  grafting,  soil  studies 
and  farm-management — here  were  topics  that  received 
attention  largely  because  of  trading  opportunities,  or 
because  manufactures  began  to  take  rank  with  agricul- 
ture as  a  mainstay  of  national  prosperity. 

Economic  organization,  correspondingly,  underwent 
far-reaching  changes.  The  medieval  guild  slowly  but 
steadily  lost  its  place  among  craftsmen.  Independence 
appealed  to  artificers  and  was  indirectly  fostered  by  city 
ideals  and  the  centralization  of  government.  Enter- 
preneurs  began  to  separate  producers  of  raw  materials 
and  the  producers  of  finished  goods,  while  in  addition  the 
cleavage  line  between  traders  and  fashioners  stood  ou't 
more  and  more  distinctly.  Production  was  still  by  hand, 
but  on  a  growing  scale,  and  supported  here  and  there  by 
machinery  that  necessitated  the  forming  of  joint-stock 
companies.  Large  cities  were  thus  given  a  start ;  nations 
now  could  comprise  millions  of  inhabitants,  all  of  them 
subject  to   one  governor,   all  conscious   of  one  flag  and 


26      THE  DEVELOPMENT  OF  ECONOMICS 

future.  The  fate  of  nations  more  than  ever  came  to  lie 
in  their  soldiers.  Rivalry  of  the  new  kind  led  to  many 
and  prolonged  international  struggles  for  power.  Money 
was  needed  everywhere.  Public  finance  attracted  the  at- 
tention of  keen  thinkers,  and  statesmen  consequently  lent 
a  willing  ear  to  men  who  proposed  to  show  how  the  might 
of  the  country  could  be  augmented.  Was  it  any  wonder 
that  economic  thought  made  headway  under  such  propi- 
tious circumstances? 

Mercantilism. — Mercantilism  and  Kameralism  are 
words  covering  the  leading  economic  ideas  of  this  period 
between  1500  and  1750,  whose  scope  and  arrangement 
was  an  earnest  of  finer  things  to  follow.  Mercantilism 
is  best  understood  as  a  doctrine  to  the  effect  that  inter- 
national trade  was  decisive  for  the  economy  of  nations, 
and  that  favorable  balances  (excess  exports  of  merchan- 
dise), when  settled  by  cash,  promoted  the  political  wel- 
fare of  nations.  Kameralism,  on  the  other  hand,  refers 
chiefly  to  the  origin  and  fiscal  interests  of  public  economy, 
the  expounders  of  this  class  being  guided  by  a  paternal- 
istic idea  such  as  Prussia  exemplified  during  the 
eighteenth  century.  Both  terms  relate  to  one  and  the 
same  body  of  teachings ;  the  difference  is  not  of  subject- 
matter  or  of  underlying  beliefs  but  of  aspects,  since  the 
one  calls  attention  to  theories  of  wealth  and  trade,  while 
the  other  alludes  to  internal  policies  and  to  administra- 
tion. But  what  should  be  especially  noted  is  the  absence 
in  all  of  these  works  of  any  attempt  at  scientific  deduc- 
tions from  premises  of  human  nature  or  of  social  in- 
tercourse. Large  libraries  were  written  on  money  and 
exchange,  on  balances  of  foreign  trade  and  on  currency, 
on  value  and  price,  on  interest  and  rent,  on  population 
and  wages,  on  the  interrelations  of  farming  and  labor, 
on  the  merits  or  demerits  of  patents  and  like  monopolies. 


NATURALISM  27 

on  consumption,  luxury,  and  waste,  on  tax  sources  and 
tax  mctliods ;  and  so  on.  Not  many  subjects  that  were 
overlooked!  Not  much  fault  to  find  with  the  standard 
treatises  if  we  once  grant  premises  and  the  limitation  of 
data  to  work  with!  There  was  scope  and  earnestness 
of  purpose,  diligence  and  patience  in  inquiry,  though  to 
be  sure  also  bias,  particularly  when  questions  of  public 
policy  were  involved. 

The  German  Kameralists  studied  and  taught  at  the 
same  time  History,  Police,  Logic,  Jurisprudence,  even 
Metaphysics,  very  much  in  the  style  that  Adam  Smith 
delivered  his  lectures  at  Glasgow.  A  close  official  and 
sometimes  personal  relation  existed  between  the  scholar 
and  the  administration.  Works  were  dedicated  to 
monarchs.  The  occasion  for  writing  was  often  a  royal 
wish.  Prussian  kings  founded  chairs  of  Kameralwissen- 
schaft  in  this  spirit  beginning  with  the  second  quarter 
of  the  eighteenth  century.  A  religious  note  also  was  at 
times  much  in  evidence,  especially  after  the  Pietistic 
movement  had  gained  force.  Men  like  Seckendorff, 
Hornigk,  and  Thomasius  relied  upon  theistic  arguments 
for  support,  while  Siissmilch  hoped  to  illustrate  the 
beneficence  of  the  deity  by  demographic  statistics. 

Germany  was  the  stronghold  of  this  Kameralistic 
approach,  while  apparently  French  and  English  thought, 
seeking  its  own  higher  level,  exercised  little  influence 
upon  it.  The  only  economic  magazine  in  Germany  about 
the  middle  of  the  eighteenth  century  virtually  ignores 
publications  across  the  Channel.  Men  like  Moser  and 
Moser  who  give  caste  to  later  German  Kameralism  seem 
not  to  be  aware  of  the  ideas  current  in  France,  which  so 
soon  were  to  be  transformed  into  a  solid  system  of  so- 
ciological thought.  Encyclopedias,  commentaries,  and 
indices  of  Economy  begin  to  appear  in  the  market,  but 


28       THE  DEVELOPMENT  OF  ECONOMICS 

barring  a  decided  widening  of  scope  the  advance  is  not 
marked. 

As  an  example  of  such  economic  thinking  we  may  men- 
tion Justi's  "The  Principles  of  Kameralism,"  1756. 
Here  we  find  indications  of  great  erudition,  but  nothing  to 
suggest  the  idea  of  a  science  dealing  with  measurable  laws 
of  human  behavior.  What  is  gained  in  variety  is  lost  in 
definiteness  of  purpose.  The  first  Book  deals  with  the 
agricultural  basis  of  life  and  matters  of  population.  The 
second  takes  up  the  technique  of  farming,  industry,  trade, 
and  credit.  In  the  third  attention  is  called  to  educational 
problems,  to  religion  and  etliics ;  the  evils  of  luxury  and 
unemployment  being  duly  considered.  Justice  also  is 
viewed  from  a  distributive  standpoint,  though  the  thought 
uppermost  in  the  mind  of  the  writer  seems  to  be  a  justifi- 
cation of  the  existing  juridical  machinery.  Finally,  in 
the  fourth  Book,  the  argument  is  concluded  with  a  sum- 
mary treatment  of  the  principles  of  jurisprudence,  the 
underlying  theory  making  political  economy  an  art 
dependent  upon  state  interference  for  its  successful 
working  out.  Social  phenomena  are  narrowed  down  to 
questions  of  administration  in  the  belief  that  this  is  the 
central  theme  of  economics.  What  is  needed,  we  are 
told,  is  a  sound  ideal  of  citizenship,  so  the  sovereign  may 
use  his  powers  to  the  best  advantage  of  the  state.  Other- 
wise no  new  principle  is  introduced  into  Justi's  survey, 
though  in  scope  and  objectivity  of  treatment  it  ranks 
of  course  high  above  those  of  tlie  seventeenth   century. 

Premises  of  Economics  in  Psychology. — However,  when 
Justi  wrote  his  "Principles"  other  men  in  France  were 
already  laying  the  foundations  for  a  very  different  sort 
of  economics.  Materials  had  been  gradually  piling  up 
that  made  this  not  only  p()ssi!)le,  but  one  is  tempted  to 
say  inevitable.      So  it  behooves  us,  in  tlie  first  place,  to 


NATURALISM  29 

examine  some  of  the  notions  fundamental  to  the  rise  of 
an  economic  science,  and  in  the  second  place  to  bear 
them  in  mind  when  following  its  later  development.  For 
there  must  be  no  uncertainty  about  the  antecedents  of 
social  science,  nor  should  we  forget  that  it  sprung  from 
philosophical  inquiries  in  part  directly,  in  part  through 
the  intermediacy  of  psychology  and  ethics. 

Philosophers  of  the  type  of  Descartes,  Hobbes,  Locke, 
Hume,  the  materialists  in  France,  political  theorists  in 
Germany,  and  moralists  in  England,  these  were  the  men 
who  started  economics  on  its  way  by  closing  the  gap 
between  free  will  and  natural  law  that  had  so  long  antago- 
nized theology  and  science.  It  was  felt  by  the  end  of 
the  seventeenth  century  that  law  reigned  everywhere,  and 
that  the  possibility  of  systematizing  sociological  data  was 
not  as  remote  as  had  been  believed.  An  empirical  position 
was  taken  with  regard  to  this  problem.  The  achievements 
of  natural  science  that  so  startled  the  world  gave  a  tre- 
mendous impetus  to  inquiries  into  the  nature  and  limits 
of  knowledge.  The  rationalists  who  argued  for  the 
necessity  of  a  unifying  faculty,  for  a  priori  judgments 
without  which  experience  would  be  meaningless,  or  for  an 
absolutist  view  of  reality,  of  right  and  wrong,  and  of 
truth,  could  nevertheless  not  deny  the  strides  made  by 
investigators  who  ignored  the  Absolute.  Every  new  dis- 
covery of  science,  every  step  in  the  elaboration  of  the 
Newtonian  system,  every  advance  in  the  study  of  human 
nature  fortified  the  claims  of  the  empiricist.  It  seemed 
clear  to  men,  particularly  in  England,  that  the  assump- 
tion of  a  reality  beyond  the  senses  was  gratuitous.  The 
belief  in  super-sensual  sources  of  knowledge  was  gradu- 
ally abandoned  by  the  very  men  who  were  most  instru- 
mental in  founding  the  science  of  economics.  Empiricism 
held  that  all  the  elements  of  knowledge  are  post-natally 


30      THE  DEVELOPMENT  OF  ECONOMICS 

acquired,  and  that,  whatever  such  facts  might  be  worth, 
or  whatever  their  adequacy  for  the  purposes  of  a  meta- 
physician, they  made  up  the  sum  total  of  human  wisdom. 

For  this  reason  perhaps  empiricism  contributed  most 
to  an  inductive  logic,  to  the  psychology  of  sensationalism, 
but  particularly  to  an  analysis  of  ethics  favoring  at  first 
individualistic  hedonism,  and  then  utilitarianism,  i.  e.,  the 
concept  of  happiness  for  the  greatest  number.  In 
epistemology  this  led  to  phenomenalism,  with  Hume  as 
its  chief  exponent,  and  to  materialism  on  French  soil. 
In  political  philosophy  it  represented  constitutionalism 
as  against  the  advocacy  of  absolutism  by  the  rationalists. 
As  exceptions  we  may  mention  Hobbes  who,  though  a 
materialist,  espoused  the  cause  of  the  autocratic  Stuarts, 
and  Spinoza  and  Kant  who  had  a  friendly  word  for 
popular  representation.  However,  their  loyalty  to  the 
monarchs  of  the  Enlightenment  contrasted  strongly  with 
their  discourses  on  government. 

But  for  that  matter  it  was  of  no  great  importance 
whether  continental  idealists  and  transcendentalists 
ruled  in  either  metaphysics  or  politics,  for  the  origins 
of  economics  lay  in  British  empiricism  and  in  French 
mechanism;  nowhere  else.  The  task  of  sketching  the 
genesis  of  economics  is  therefore  made  comparatively 
easy,  because  in  noting  the  ascendancy  of  Saxon  em- 
piricism one  has  virtually  explained  all.  The  first 
English  philosophers  and  ethicists  borrowed  freely  from 
Descartes  and  Gassendi,  but  the  later  ones  returned 
with  compound  interest  to  France  this  same  principal. 
Continental  European  economics,  not  excluding  the  devel- 
opments in  Utilitarianism  and  Marginism,  never  rid  itself 
of  the  cmpirical-phenomenalistic  heritage.  As  will  be  seen 
hereafter,  a  not  contemptible  portion  of  what  is  charac- 
teristic  in   present-day   economics,   had   its   inception   in 


NATURALISM  31 

the  views  of  eighteenth  century  British  empiricists.  Their 
psychology  provided  a  basis  for  ethics,  although  other 
ingredients  went  into  it  also.  In  their  search  for  a  theory 
of  knowledge  they  enlarged  gratifyingly  the  existing 
fund  of  psychological  knowledge,  besides  laying  thereby 
the  foundation  for  a  Logic  that  in  J.  S.  Mill  reached  its 
most  perfect  and  persuasive  form.  What  was  expounded 
in  the  countless  treatises  on  human  nature  in  those  fruit- 
ful years  has  remained  up  to  this  date  a  groundwork  for 
textbooks  on  price  and  distribution. 

With  the  Renaissance  of  learning  there  came  of  course 
also  a  renewed  interest  in  problems  of  thought  and 
behavior.  AVhat  the  Greeks  had  said  on  that  subject 
served  once  more  as  an  inspiration  for  the  speculators 
of  the  seventeenth  and  eighteenth  centuries.  It  was 
apparent  from  the  outset  that  much  had  been  overlooked, 
even  though  a  great  deal  called  for  a  revamping. 
Descartes  here  as  elsewhere  led  the  van  and  made  note- 
worthy contributions  which,  however,  need  not  detain  us 
because  they  did  not  as  such  influence  the  founders  of 
economics.  What  continental  thinkers  brought  to  light 
on  this  matter  was  little  compared  to  what  Englishmen 
added  themselves.  Hobbes,  who  had  visited  Paris  and 
had  met  both  Descartes  and  Gassendi,  could  properly 
attribute  his  start  in  materialism  to  these  two  scholars. 
As  materialist,  however,  Hobbes  did  not  further  the  cause 
of  economics,  and  as  psychologist  he  was  only  a  pioneer, 
the  central  figure  in  the  whole  history  of  empirical  psy- 
chology being  John  Locke. 

Still,  this  much  should  be  said  about  Hobbes'  views  on 
fundamentals  of  consciousness.  He  was  emphatic  in  his 
avowal  of  a  materialistic  thesis.  He  reduced  psychics  to 
physics  and  put  up  the  equation :  Notion  is  motion ;  that 
is,  matter  and  motion  suffice  to  explain  all  experiences. 


32       THE  DEVELOPMENT  OF  ECONOMICS 

He  begins  In  his  exposition  with  nerve  vibration,  which 
is  held  to  move  the  minutest  particles  of  neural  and  cere- 
bral stuff.  Contact  with  the  outer  world  is  made  respon- 
sible for  this  agitation  within.  Responses  result.  Sensa- 
tions become  consciousness,  or  are  it.  And  regardless 
of  what  the  complexities  of  consciousness,  they  are 
derivable  each  and  all  from  the  first  principle  announced. 
Thus  in  his  "Leviathan"  which  represents  mature  thought 
after  earlier  essays  in  psychology,  he  informs  us :  "The 
original  of  them  [that  is,  of  our  thoughts]  all  is  that 
which  we  call  sense ;  for  there  is  no  conception  in  a  man's 
mind  which  hath  not  at  first,  totally  or  by  parts,  been 
begotten  upon  the  organs  of  sense.  The  rest  are  derived 
from  that  original."  ^ 

"To  know  the  natural  cause  of  sense,  is  not  very  neces- 
sary to  the  business  now  in  hand ;  and  I  have  elsewliere 
written  of  the  same  at  large.  Nevertheless,  to  fill  each 
part  of  my  present  method  I  will  briefly  deliver  the  same 
in  this  place."  ^ 

"The  cause  of  sense  is  the  external  body  or  object 
which  prcsseth  the  organ  proper  to  each  sense,  either 
immediately  as  in  the  taste  and  touch ;  or  mediately  as 
in  seeing,  hearing,  and  smelling:  Which  pressure,  by  the 
mediation  of  nerves  and  other  strings,  and  membranes  of 
the  body,  continued  inwards  to  the  brain,  and  heart, 
causeth  there  a  resistance  or  counter-pressure,  or 
endeavor  of  the  heart  to  deliver  itself,  which  endeavor 
because  outward  seemeth  to  be  some  matter  without. 
And  this  seeming  or  fancy  is  that  which  men  call  sense; 
and  consisteth,  as  to  the  eye,  in  a  light,  or  color  figured ; 
to  the  ear,  in  a  sound;  to  tlie  nostrill,  in  an  odor;  to  the 
tongue  and  palat,  in  a  savor;  and  to  the  rest  of  the  body, 

'  Quotations  are  from  the  first  edition  of  1651.     See  Part  I,  ch.  1. 
'Ibidem. 


NATURALISM  33 

in  heat,  cold,  hardness,  softness,  and  such  other  qualities 
as  we  discern  by  feeling."  ^ 

Only  four  mental  states  are  recognized,  viz.,  sensation, 
imagination,  memory,  and  desire,  the  second  and  third 
figuring  as  "decaying  sense."  And  then  we  are  told  that 
of  the  two  possible  kinds  of  trains  of  thought  sprung  from 
single  ideas  the  "second  is  more  constant ;  as  being 
regulated  by  some  desire  and  design.  For  the  impression 
made  by  such  things  as  we  desire,  or  fear,  is  strong  and 
permanent,  or  (if  it  cease  for  a  time)  of  quick  return." 
.  .  .  "From  desire  ariseth  the  thought  of  some  means 
we  have  seen  produce  the  like  of  that  which  we  aim 
at;  and  from  the  thought  of  that,  the  thought  of  means 
to  that  mean ;  and  so  continually  till  we  come  to  some 
beginning  within  our  own  power."  ^ 

Hence  two  general  facts  arise  that  economists  up  to 
J.  S.  Mill  have  considered  seriously  in  discussing  motives 
and  methodology,  namely,  in  the  first  place  truth  consists 
in  an  agreement  of  ideas  among  each  other,  not  of  ideas 
with  things  outside  as  others  maintained,  and  in  the 
second  place,  desire  rests  on  sensations  or  a  memory 
thereof,  the  net  result  being  a  moral  judgment  standard- 
ized by  society. 

Hobbes  said :  "When  a  man  reasoneth  he  does  nothing 
but  conceive  a  sum  total,  from  additions  of  parcels ;  or 
conceive  a  remainder,  from  subtraction  of  one  sum  from 
another;  which  (if  it  be  done  by  words)  is  conceiving 
of  the  consequence  of  the  names  of  all  the  parts  to 
the  name  of  the  whole;  or  from  the  names  of  the 
whole  and  one  part,  to  the  name  of  the  other  part."  ^ 
And  a  propos  of  this  it  is  further  remarked:  "Cause  is 
the  sum  or  aggregate  of  all  such  accidents,  both  in  the 

'  Ibidem. 
*  Ch.  3, 
•Ch.  5. 


34       THE  DEVELOPMENT  OF  ECONOMICS 

agent  and  in  the  patient,  as  concur  to  the  production  of 
the  effect  propounded,  all  which  existing  together  it 
cannot  be  understood  but  that  the  effect  existeth  with 
them;  or  that  it  can  possibly  exist  if  any  of  them  be 
absent,"  ^  .  .  .  a  way  of  looking  at  the  problem  of 
causation  that  does  not  differ  greatly  from  J.  S.  Mill's 
in  his  Logic  written  nearly  two  centuries  later. 

As  to  desire,  this  is  simply  a  kind  of  motion  "within 
the  body  of  man,"  which  is  commonly  called  endeavor; 
and  "this  endeavor,  when  it  is  toward  something  which 
causes  it,  is  called  appetite  or  desire;  .  .  .  and  when  the 
endeavor  is  fromward  something,  it  is  generally  called 
aversion."  '^  "But  whatsoever  is  the  object  of  any  man's 
appetite  or  desire,  that  is  it  which  he  for  his  part  calleth 
good:  And  the  object  of  his  hate  and  aversion,  evil;  and 
of  his  contempt,  vile  and  inconsiderable.  For  these  words 
of  Good,  Evil,  and  Contemptible  are  ever  used  with  rela- 
tion to  the  person  that  useth  them :  There  being  nothing 
simply  and  absolutely  so ;  nor  any  common  rule  of  Good 
and  Evil  to  be  taken  from  the  nature  of  the  objects  them- 
selves ;  but  from  the  person  of  the  man,  ...  or  from  an 
arbitrator  or  judge,  whom  men  disagreeing  shall  by  con- 
sent set  up,  and  make  his  sentence  the  rule  thereof."  ^ 
In  other  words,  concepts  of  good  and  bad  are  acquired 
like  other  knowledge,  being  usually  purposive,  and  vari- 
able for  time  and  place. 

There  is  much  in  Hobbes'  view  that  Locke,  who  belongs 
to  the  next  generation,  shared  with  him;  but  the  differ- 
ences are  no  less  striking.  Hobbes  ranked  high  as 
systematizer,  but  evinced  little  originalit3%  He  repeated 
himself  in  order  to  drive  home  his  main  doctrines,  and 

"  Ilobbos,  The.     Elements  of  Philosophy,  1C55,  W.   Molesworth  edition, 
1839,  Part  I,  ch.  fi.     See  also  Part  II,  ch.  9. 
'  Leviathan,  Part  I,   ch.   «. 
'  Ibidem. 


NATURALISM  35 

moreover  repelled  readers  by  his  lumbering  style  both  in 
Latin  and  in  his  native  tongue.  Locke  was  equally  prac- 
tical at  bottom,  as  his  public  career  proves  to  satisfaction, 
but  on  the  whole  was  more  thorough  and  versatile. 
Though  depending  much  less  upon  continental  models  of 
thought,  he  succeeded  in  making  himself  clear  to  a  large 
circle  of  readers.  He  greatly  improved  the  psychology 
of  his  older  compatriot.  His  influence  was  enormous  and 
affected  the  political  events  of  two  continents.  He  took 
his  time  in  meditating  over  abstruse  questions.  He 
waited  twenty  years  before  giving  his  "Essay  Concerning 
Human  Understanding"  to  the  world  (in  1689).  His 
main  aim  is  to  reveal  the  roots  and  limits  of  knowledge, 
not  to  clarify  ideas  on  passions  and  ethics.  He  does 
away  with  the  argument  for  innate  ideas,  and  in  the 
fourth  book  of  his  Essay  enters  cautiously  upon  his 
central  topic. 

In  general  he  adheres  to  sensationalism,  but  adds 
that  reflections,  being  "the  perception  of  the  operations 
of  our  own  minds  within  us  as  it  is  employed  about  the 
ideas  it  has  got,  which  operations,  ...  do  furnish 
the  understanding  with  another  set  of  ideas  which  could 
not  be  had  from  things  without"  ^  must  be  distinguished 
from  sensations  directly  traceable  to  outside  stimuli. 
All  ideas  are  thus  derived  from  sense  or  from  reflection. 
Simple  ideas  become  complex  "by  combining  several 
simple  ideas  into  one  compound,"  ^^  or  through  like 
processes.  Through  association  ideas  are  built  into  more 
or  less  regularly  recurring  and  compact  groups  of 
thought,  and  through  wrong  associations  many  errors 
arise,  as  for  instance  superstitions  and  fallacies  in  argu- 
mentation. 

» Locke,  J.  Essay  Concerning  the  Human  Understanding,  1689,  Book 
II,  ch.  1,   §  4. 

"Ibidem,  ch.  12,  §  1. 


36      THE  DEVELOPMENT  OF  ECONOMICS 

But  what  is  here  more  to  the  point,  Locke  not  only 
repeats  Hobbes'  view  that  truth  consists  of  an  agree- 
ment between  ideas  merely — thus  adopting  phenomenal- 
ism ^^ — but  furthermore  proclaims  the  certainty  of  moral 
truths  derived  indirectly  from  reflections.  For:  "Complex 
ideas,  except  those  of  substances,  being  archtypes  of  the 
mind's  own  making,  not  intended  to  be  the  copy  of  any- 
thing, .  .  .  cannot  want  any  conformity  necessary  to 
real  knowledge."  ^^  "And  hence  it  follows  that  moral 
knowledge  is  as  capable  of  real  certainty  as  mathe- 
matics." ^^  Indeed,  "truth  properly  belongs  only  to 
propositions,"  ^^  either  as  in  logic,  the  demonstrative  sci- 
ence, or  as  in  mathematics  and  ethics,  the  intuitive  kind 
of  knowledge,  all  the  rest  being  empirical  and  no  more 
than  probable  knowledge  such  as  is  gathered  by  nat- 
ural science. 

Now,  in  this  conception  of  the  laws  of  thinking  and 
feeling  Locke  was  followed  quite  closely  by  David 
Hume,  although  there  confronts  us  again  a  change  of 
classifications  and  of  terms.  For  instance,  Hume  dis- 
tinguished between  impressions  and  ideas,  his  "Treatise 
of  Human  Nature,"  written  when  he  was  scarcely  twenty- 
-five  years  old,  commencing  with  this  thought  upon  which 
so  much  was  made  to  rest.  "All  our  sensations,  passions, 
and  emotions,"  he  says,  are  impressions,  while  "the  faint 
images  of  these  in  thinking  and  reasoning"  constitute  the 
idea.  Every  simple  idea  springs  from  an  impression, 
while  complex  ideas,  developed  from  them  in  the  style 
described  by  Locke,  may  originate  also  from  other  ideas, 
instead  of  from  impressions.  Besides,  impressions  "may 
be  divided  into  two  kinds,  those  of  sensation  and  those  of 

"  Ibidem,  Book  IV,  ch.  4  §  5. 
"  Ibidem. 
"  Ibidem. 
"Ibidem. 


NATURALISM  37 

reflexion,"  the  latter  being  "derived  in  a  great  measure 
from  our  ideas,  and  that  in  the  following  order:  An 
impression  first  strikes  upon  the  senses  and  makes  us 
perceive  heat  or  cold,  thirst  or  hunger,  pleasure  or  pain 
of  some  kind  or  other.  Of  this  impression  there  is  a 
copy  taken  by  the  mind,  which  remains  after  the  impres- 
sion ceases ;  and  this  we  call  an  idea.  This  idea  of 
pleasure  or  pain,  when  it  returns  upon  the  soul,  produces 
the  new  impressions  of  reflexion,  because  derived  from  it. 
These  again  are  copied  by  the  memory  and  imagination 
and  become  ideas ;  which  perhaps  in  their  turn  give  rise 
to  other  impressions  and  ideas.  So  that  impressions  of 
reflexion  are  only  antecedent  to  their  correspondent  ideas ; 
but  posterior  to  those  of  sensation,  and  derived  from 
them."  ^5 

Locke's  argument  on  laws  of  association  as  the  key 
to  chains  of  reasoning  is,  conformably  to  this  view, 
accepted  almost  in  its  entirety.  Hume,  in  order  to  round 
out  his  phenomenalistic  sweep,  has  merely  to  add  that 
this  principle,  conjoined  with  that  of  "a  like  association 
of  impressions,"  opens  the  way  also  for  a  science  of 
morals,  in  that  the  interactions  for  all  cases  are  of  like 
nature.  "There  is  but  one  kind  of  necessity,  as  there  is 
but  one  kind  of  cause,  and  the  common  distinction 
betwixt  moral  and  physical  necessity  is  without  any 
foundation  in  nature."  ^^  Natural  and  social  sciences 
move,  in  this  sense,  on  one  level.  Causation  becomes  a 
purely  conceptual  thing,  and  mathematics  similarly 
merely  a  demonstration  from  premises  arbitrarily 
posited.  For  the  rest,  there  are  probabilities,  but  not 
certainties.  All  knowledge  is  illusory,  however  definite 
our  feeling  about  the  environment  that  the  senses  bring 

">  Hume,  D.  Treatise  of  Human  Nature,  1739.  Edition  by  Selby-Bigge 
of  1S88  ;   Book  I,  Part  I,   §   2. 

"  Ibidem,  Book  I,  Part  III,   §  14. 


38       THE  DEVELOPMENT  OF  ECONOMICS 

us  in  touch  with.  Metaphysics  could  not  explain  what 
experience  left  doubtful  as  a  matter  of  logic. 

Premises  of  Economics  in  Ethics. — Herein  then  lay  also 
the  reason  for  the  ethical,  as  contrasted  with  the 
epistemological,  skepticism  of  the  empiricists.  It  was 
not  surprising  that  a  matter-of-fact  attitude  should 
resolve  moral  values  into  routine  appraisals  of  a  prac- 
tical-minded man,  thus  forcing  economics  in  the  end  to 
an  admission  either  that  economics  is  ethics,  or  that  ethics 
is  not  part  and  parcel  of  science  at  all,  but  rather  a  mode 
of  speculation  that  must  be  kept  quite  distinct  from 
purely  descriptive  analysis. 

Furthermore,  ethics  before  the  nineteenth  century 
lacked  the  support  that  an  accurate  knowledge  of 
biology  and  social  processes  might  have  given.  It  was 
still  the  age  of  introspection  and  deductions  from  theo- 
rems pertaining  primarily  to  the  problem  of  reasoning. 
If  Christian  influences  therefore  did  not  predetermine 
ethical  precepts,  or  metaphysical  idealism  forestall  a 
pragmatic  version,  a  common  sense  standpoint  was  most 
natural.  Men  consulted  their  own  innermost  thoughts 
and  arrived  thence  at  certain  conclusions.  The  period 
of  the  Enlightenment  was  prone  to  look  at  itself  by  way 
of  self-criticism.  Memoirs  and  autobiographies  penned 
with  brutal  frankness,  classification  in  utmost  detail  that 
extended  even  to  the  realm  of  art,  notably  of  painting, 
sightseeing  tours  to  learn  of  other  people's  manners  from 
a  discriminating  angle,  such  were  diversions  fashionable 
at  a  time  when  leisure  was  still  respected  and  a  pension 
or  sinecure  the  normal  goal  of  many  a  distinguished 
intellect.  The  relative  place  of  nature,  man,  and  mind 
was  the  subject  of  profound  musings.  A  reconciliation  of 
opposites  seemed  imperative,  and  with  the  aid  of  pagan 
thinkers  the  task  was  bravely  begun. 


NATURALISM  39 

It  would  of  course  be  too  much  to  say  that  the  Greeks 
furnished  the  age  of  Enhghtenment  with  the  ideas  back 
of  the  "Wealth  of  Nations"  or  the  gospel  of  hedonism. 
Such  direct  and  unqualified  approval  was  quite  out  of 
the  question,  partly  because  modern  science  and  psychol- 
ogy provided  enough  new  material  of  their  own,  and 
partly  because  Christian  ideals  after  all  exerted  a  power- 
ful influence  upon  minds  of  every  shade  of  philosophical 
opinion,  upon  empiricists  and  phenomenalists  no  less  than 
upon  the  rationalists  of  the  type  of  Leibniz  and  Kant. 
However,  there  remains  the  fact  that  the  Renaissance 
revived  Greek  ethics  as  well  as  Greek  metaphysics  and 
art,  and  that  the  reprints  in  the  original,  with  copious 
commentaries,  of  the  Greek  treatises  gained  vogue  among 
thinkers  who,  indirectly,  were  the  fathers  of  economics. 

The  ethics  of  Plato  and  Aristotle  was  less  influential, 
so  far  as  the  development  of  economics  is  concerned,  than 
the  doctrine  of  their  successors.  It  was  the  product  of 
Greek  skepticism  that  the  eighteenth  century  could  best 
appreciate — the  philosophy  of  disappointment  and  of 
negation  that  the  political  and  intellectual  history  of 
Greece  so  naturally  led  up  to,  even  if  it  was  not  the 
primary  cause  of  it.  What  Epicurus  and  Zeno  had 
preached  was  more  easily  understandable  (at  least  in  its 
original  form)  than  what  more  systematic  thinkers  like 
Plato  or  Aristotle  expounded  in  terms  far  removed  from 
the  commonplaces. 

The  two  main  schools  of  Greek  ethics  that  dominated 
ancient  thought  up  to  the  fall  of  the  Roman  empire  both 
had  something  to  give  to  a  modern  age  in  which 
mechanism  and  teleological  notions,  deep  religious  fervor 
and  cold  rationalistic  temper  existed  side  by  side,  not 
only  in  the  minds  of  humble  folk,  but  particularly  in  the 
world  of  research  and  meditation. 


40       THE  DEVELOPMENT  OF  ECONOMICS 

Both  Epicureanism  and  Stoicism  sprang  from  mate- 
rialism. Both  might  have  claimed  Protagoras  and 
Democritus  as  their  intellectual  godfathers.  In  both 
schools  knowledge  was  traced  to  the  senses,  and  happiness 
sought  as  the  chief  aim  in  life.  So  that,  to  begin  with, 
they  united  in  rejecting  the  ideal  of  absolute  truth,  of 
perfect  virtue,  of  goodness  based  on  knowledge,  or  reali- 
ties transcending  the  results  of  perception.  However, 
here  the  resemblance  stopped,  for  the  Epicureans  made 
happiness  a  self-sufficient  reward  of  their  endeavors, 
while  the  Stoic  doctrine  sought  happiness  chiefly  as  a 
by-product  of  uncompromising  virtue.  What  is  more, 
according  to  Epicurus  pleasure  itself  was  good,  and  pain 
bad,  and  though  the  elevation  of  mind  was  by  no  means 
scorned,  the  main  trend  was  toward  creature  comforts. 
It  was  pleasure  of  the  self  that  Epicureanism  aimed  at, 
pleasures  varying  in  quantity  merely,  the  duration  of 
pleasure  counting  more  than  its  intensity  at  the  moment. 
To  achieve  happiness  in  this  sense,  therefore,  wants  had 
to  be  multiplied.  The  normal  thing  to  do  was  to  cater 
to  wants,  to  add  to  their  variety,  and  to  take  care  that 
the  human  will  was  employed  to  this  end.  In  spite  of  a 
materialistic  undercurrent,  consequently,  the  volitional 
aspect  of  life  received  much  attention.  What  happened 
here  on  earth  counted  most  of  all.  An  essentially  non- 
religious  attitude  was  assiduously  cultivated,  the  general 
result  of  which  was  a  struggle  said  to  go  on  between  man 
and  nature,  since  man  had  to  labor  in  certain  ways  to 
gain   contentment. 

The  Stoics,  quite  to  the  contrary,  extolled  the  advan- 
tages of  an  ascetic  spirit.  They  agreed  that  happiness 
was  the  desideratum,  but  in  making  it  an  incident  to 
unalloyed  virtue  tlicy  turned  their  back  on  the  quantita- 
tive interpretation  of  values.     It  was  the  quahty  of  pain 


NATURALISM  41 

and  pleasure  that  mattered  decidedly.  Peace  would 
fall  to  those  solely  who  learned  how  to  renounce,  how 
to  abstain  and  explain  away  the  necessity  of  things. 
The  fewer  wants,  the  nobler  the  victory,  so  we  are  told. 
In  a  mood  of  resignation,  thus,  Stoicism  passed  over  to 
a  kind  of  fatalistic  belief.  For  all  their  preachments  of 
a  God  and  of  a  Purpose,  they  bowed  to  Fate.  And  with 
this  attempt  at  an  all-embracing  outlook  there  came  the 
union  of  reason  and  morality.  To  the  Stoic,  God  was  in 
nature ;  pantheism  seemed  alone  satisfactory.  And  again, 
nature  betokened  reason,  while  virtue  in  turn  was  ob- 
tainable only  through  a  conscientious  application  of 
reason.  Hence  God,  reason,  nature,  and  law  became  all 
one.  What  ruled  in  the  universe  was  a  mighty  single 
principle.  The  emanations  of  the  human  mind  at  their 
best  could  not  but  reflect  the  greater  spirit  ruling  with- 
out. Man  and  nature  were  one.  To  understand  our- 
selves we  needed  the  outside  world  to  instruct  us.  It 
was  evident  that  nothing  was  gained  by  pitting  feeble 
man  against  irresistible  forces  about  him. 

Contrasting  the  two  viewpoints  in  this  manner  one 
cannot  guess  at  once  which  of  the  two  would  satisfy  best 
the  needs  of  a  social  science.  It  is  not  by  weighing  the 
relative  merits  of  the  two  that  we  find  their  place  in  mod- 
ern thought,  but  by  remembering  that  Christianism 
reigned  everywhere  in  Europe,  while,  as  regards  the  prac- 
tical side  of  a  theory  of  conduct,  much  could  be  said  in 
favor  of  one  of  the  doctrines,  and  little  for  the  other. 
So  it  came  about — one  is  inclined  to  add  logically — that 
the  Stoics  colored  political  philosophy,  while  the  Epi- 
cureans found  friends  mainly  among  out  and  out  econo- 
mists. At  any  rate,  what  the  seventeenth  and  eighteenth 
centuries  said  on  government  and  international  law  heark- 
ened back   to   ancient   Greek  and  Roman   Stoicism;   but 


42       THE  DEVELOPMENT  OF  ECONOMICS 

what  impressed  the  sensationalists  in  England  was  for 
the  most  part  the  hedonism  of  Epicurus.  Monotheism 
among  the  clergy  and  many  of  the  Transcendentalists 
was  not  to  be  sullied  by  the  implications  of  the  Stoics, 
implications  that  were  of  oriental  design  anyhow,  and 
ran  directly  counter  to  the  Nicasan  Creed.  So  it  seems 
reasonable  that  continental  thinkers  like  Descartes, 
Geulincx,  Malebranche,  Arnauld,  Pascal,  Bossuet, 
Spinoza,  Leibniz,  Thomasius,  Wolff,  and  finally  Kant 
grounded  their  ethical  systems  on  Plato,  Aristotle,  or 
the  Bible  alone.  Adam  Smith  himself,  though  hostile  to 
sheer  utilitarianism,  disapproved  at  the  same  time  also 
of  Stoicism. 

Yet  the  Physiocrats  incorporated  Stoic  teachings  in 
their  economics  by  way  of  political  philosophy,  uniting 
nature  and  man,  while  Epicureanism  came  to  power  in 
the  second  stage  of  economic  growth,  when  Smith's  sys- 
tem was  transformed  into  Utilitarianism.  As  will  be- 
come apparent  later  on,  this  switching  from  stoically  to 
hedonistically  tinged  economics  was  one  of  the  chief 
changes  occurring  between  1776  and  1836  when  Senior 
published  his  article  on  economics  in  the  ^Nletropolitana. 
,  The  beginnings,  however,  lie  again  in  Hobbes,  just 
as  in  matters  of  psychology  and  logic.  For  Hobbes  was 
the  first  British  writer  to  profit  by  the  revival  of  Greek 
sensationalism  in  France  during  the  first  half  of  the 
seventeenth  century. 

Incidentally  speaking,  Hobbes,  of  course,  applied  his 
philosophy  to  practical  questions  of  politics.  It  was 
natural  for  him  to  trace  a  relation  between  materialism 
and  hedonism  on  one  side,  and  between  both  and  a  theory 
of  absolute  government  on  the  other  side.  He  was  con- 
vinced that  men  were  alike  in  fundamentals,  and  needed  a 
strong  arbiter  to  keep  them  orderly.     He  believed  in  the 


NATURALISM  43 

genuineness  of  a  compact  between  people  and  ruler,  and 
saw  no  promise  of  a  millennium  so  long  as  human  beings 
were  fundamentally  selfish.  In  his  own  words  ("Leviathan, 
or  the  Matter,  Form,  and  Power  of  a  Commonwealth 
Ecclesiastical  and  Civil,"  1651),  "Nature  hath  made  men 
so  equal  in  the  faculties  of  body  and  mind"  that,  though 
some  differences  exist,  "the  difference  ...  is  not  so  con- 
siderable as  that  one  man  can  thereupon  claim  to  himself 
any  benefit  to  which  another  may  not  pretend  as  well  as 
he."  ^^  So,  "from  this  equality  ariseth  equality  of  hope 
in  the  attaining  of  our  ends ;  and  therefore  if  any  two 
men  desire  the  same  tiling,  which  nevertheless  they  cannot 
both  enjoy,  they  become  enemies."  ^^  The  result  is  a 
war  of  all  against  all;  for  it  is  "a  general  rule  of  reason 
that  every  man  ought  to  endeavor  peace,  as  far  as  he 
has  hope  of  attaining  it;  and  when  he  cannot  obtain  it, 
that  he  may  seek  and  use  all  helps  and  advantages  of 
war."  ^^ 

It  was  this  sort  of  an  appraisal  that  made  Hobbes  an 
outspoken  opportunist  in  matters  moral.  He  assures  us : 
"No  man  giveth  but  with  intention  of  good  to  himself; 
because  gift  is  voluntary;  and  of  all  voluntary  acts  the 
object  is  to  every  man  his  own  good;  of  which,  if  men 
see  they  shall  be  frustrated,  there  will  be  no  beginning 
of  benevolence  or  trust,  nor  consequently  of  mutual 
help  .  .  .  " ;  -0  j^jj(3[  SQ  Qj^_  Indeed,  it  is  characteristic, 
and  deserves  mention  even  at  this  point  in  our  investiga- 
tion of  economic  history,  that  Hobbes  attributed  com- 
merce entirely  to  motives  of  mutual  benefit,  and  this  from 
a  standpoint  close  to  the  Marginal !  Thus  he  writes : 
"The  value  of  all  things  contracted  for  is  measured  by 

"  Hobbes,  Leviathan,  ch.  13. 

"  Ibidem. 

"  Ibidem,  ch.  14. 

"  Ibidem,  ch.  15. 


44       THE  DEVELOPMENT  OF  ECONOMICS 

the  appetite  of  the  contractors ;  and  therefore  the  just 
value  is  that  which  they  be  contented  to  give."  ^^  And 
again  it  is  in  keeping  with  this  prosaic  view  of  human 
nature  that  he  informs  us :  "Moral  philosophy  is  noth- 
ing else  but  the  science  of  what  is  good  and  evil  in  the 
conversation  and  society  of  mankind.  Good  and  evil  are 
names  that  signify  our  appetites  and  aversions ;  which 
in  different  tempers,  customs,  and  doctrines  of  men  are 
different."  ^^  Even  the  Stoic  law  of  nature  is  reduced 
to  a  hedonistic  terminology,  for  we  read  that,  while  "the 
true  doctrine  of  the  laws  of  nature  is  the  true  moral 
philosophy,"  ^^  a  "law  of  nature  is  a  precept  or  general 
rule  found  out  by  reason,  by  which  a  man  is  forbidden 
to  do  that  which  is  destructive  of  his  life,  or  taketh  away 
the  means  of  preserving  the  same ;  and  to  omit  that  by 
which  he  thinketh  it  may  be  best  preserved."  -*  So  all 
judgments  are  relative  both  as  between  nations  or  indi- 
viduals, and  as  between  one  situation  in  which  any  one 
of  us  may  find  himself,  and  a  second  situation.  Values 
are  always  pragmatic.  Nothing  sums  up  more  concisely 
Hobbes'  view  of  ethics  than  his  remark:  "There  is  no 
such  .  .  .  Summum  Bonum  as  is  spoken  of  in  the  works 
of  the  old  moral  philosophers,"  ^^  a  sentiment  shared, 
as  was  the  bulk  of  his  moral  outlook,  by  John  Gay  when 
he  Avrote:  "Obligation  is  the  necessity  of  doing  or  omit- 
ting any  action  in  order  to  be  happy."  ^® 

Now,  Locke  was  a  good  bit  of  a  hedonist  in  the 
eighteenth  century  sense  of  the  word,  but  like  most  of 
the  empiricists  following  Hobbes  he  refused  to  accept  a 
coldbloodedly  individualistic  standpoint.     He  tells  us  in 

2'  Ibidem. 

*-  Iljidem.     See  also  ch.  6. 
"  Ibidem. 
"  Ibidem. 
"Ibidem,  ch.  11. 

"  (Jay,  J.  Preliminary  Dissertation :  Concerning  the  Fundamental 
Principles  of  Virtue  and  Morality. 


NATURALISM  45 

his  Journal  that  no  doubt  man  lives  mainly  to  obtain 
"the  happiness  this  world  is  capable  of,  which  is  nothing 
but  plenty  of  all  sorts  of  those  things  which  can,  with 
most  ease,  pleasure,  and  variety,  preserve  him  longest 
in  it";  but  his  whole  theory  of  sensationalism  leads 
toward  a  social  interpretation  of  pleasure.  Ideas  of  ap- 
proval figure  prominently  in  Locke's  experiences.  What 
we  think  of  people,  and  how  we  react  to  their  disapproval, 
constitutes  necessarily  a  part  of  the  associations  that 
are  built  into  creeds  and  proofs.  Precisely  in  this  sense 
"delight  or  uneasiness,'*  he  remarks,  "join  themselves  to 
almost  all  our  ideas  of  both  sensation  and  reflection ;  and 
there  is  scarce  any  affection  of  our  senses  from  without, 
and  retired  thought  of  our  mind  within,  which  is  not  able 
to  produce  in  us  pleasure  or  pain."  ^^ 

The  connection,  thus,  between  Locke's  view  of  knowl- 
edge and  his  view  of  ethics  can  hardly  be  misunderstood. 
The  one  logically  leads  to  the  other.  It  is  as  Locke 
writes  in  a  significant  paragraph:  "Amongst  the  simple 
ideas  which  we  receive  both  from  sensation  and  reflection, 
pain  and  pleasure  are  two  very  considerable  ones.  For 
as  in  the  body  there  is  sensation  barely  in  itself,  or  ac- 
companied with  pain  and  pleasure,  so  the  thought  or 
perception  of  the  mind  is  simply  so,  or  else  accompanied 
also  with  pleasure  or  pain,  delight  or  trouble,  call  it  how 
you  please."  "^  Ethics  is  "the  seeking  out  tliose  rules 
and  measures  of  human  actions  which  lead  to  happiness, 
and  the  means  to  practice  them" ;  ~^  but  "things  arc  good 
and  evil  only  in  reference  to  pleasure  and  pain,"  ^^  so 
that  ideas,  memories,  and  associations  are  of  primary 
importance. 

"  Locke,  Essay  Concerning  Human  Understanding,  Book  II,  ch.  7,  §  2. 
"Ibidem,  Book  II.  ch.  20,   §  1. 
"Ibidem,  Book  IV,  ch.  21. 

'"Ibidem.  Book  II.  ch.  20,  §  2.  For  Locke's  definition  of  pleasure, 
pain,  and  happiness  see  ch.  20,  §  15,  and  ch.  21,  §  42. 


46       THE  DEVELOPMENT  OF  ECONOMICS 

The  social,  or  the  universalistic  phase,  as  it  has  by 
some  been  called,  of  ethical  empiricism  was  taken  up  again 
by  Hume  in  his  inquiries  into  the  problem  of  knowledge; 
and  this  time  the  irrationality  of  morals  becomes  evi- 
dent enough.  It  is  not  altogether  a  matter  of  ideas  or 
impressions,  we  are  assured.  The  intellectualistic  theory 
of  feelings  will  not  in  itself  suffice  to  explain  the  whole 
situation.  Even  though  stimuli  and  feeling,  painful  re- 
membrances and  moral  judgments  are  closely  related,  fur- 
ther items  deserve  mention.  On  the  one  hand,  Hume  in- 
forms us,  "it  is  easy  to  observe  that  the  passions,  both 
direct  and  indirect,  are  founded  on  pain  and  pleasure,  and 
that  in  order  to  produce  an  affection  of  any  kind,  'tis  only 
requisite  to  present  some  good  or  evil.  Upon  the  re- 
moval of  pain  and  pleasure  there  immediately  follows  a 
removal  of  love  and  hatred,  pride  and  humility,  desire 
and  aversion,  and  of  most  of  our  reflective  or  secondary 
impressions."  ^^  But  on  the  other  hand  feelings  spring 
from  a  variety  of  sources,  not  all  of  which  affect  our 
fellowmen  equally.  "For  we  reap  a  pleasure  from  the 
view  of  a  character  which  is  naturally  fitted  to  be  useful 
first  to  others,  or  secondly  to  the  person  himself,  or 
w.hich  is  agreeable  first  to  others,  or  secondly  to  the  per- 
son himself."  ^^  What  is  more,  "the  mind  by  an  orig- 
inal instinct  tends  to  unite  itself  with  the  good,  and  to 
avoid  the  evil,  though  they  be  conceived  merely  in  idea, 
and  be  considered  as  to  exist  in  any  future  period  of 
time."  ^^  Or  to  put  it  differently :  "Moral  sentiments 
may  arise  either  from  the  mere  species  or  appearance 
of  characters  and  passions,  or  from  reflections  in  their 
tendency  to  the  happiness  of  mankind,  and  of  particular 
persons."  ^* 

"  Ilumc,  Treatise,  Book  II,  Tart  III,   §  9. 
"Ibidem,  Book  III,  Part  III,  §  1. 
"  Ibidoin,   Book  II,  I'art   III,    §  9. 
"Ibidem,  Book  III,  Part  III,  §  1. 


NATURALISM  47 

As  will  be  seen  from  Chart  One  the  development  of 
British  utilitarianism,  as  ethics,  can  be  indicated  only  by 
reference  to  many  writers,  there  being  a  natural  line  of 
division  between  empiricists  proper  and  intuitionists  who 
believed  in  an  innate  sense  of  right  and  wrong;  but  be- 
yond that  distinctions  involve  considerable  attention  to 
details.  Whether  a  theistic  concept  or  a  resort  to 
conscience  or  a  sociological  view  preponderates  in  any 
particular  work  it  is  sometimes  impossible  to  tell.  We 
feel  only,  as  in  the  case  of  Hume,  that  sensationalistic 
psychology  is  not  consistently,  or  not  exclusively,  em- 
ployed as  a  key  to  morals.  Virtue  according  to  Hume, 
for  instance,  might  not  be  natural — so  that  both  in- 
tuitionists and  Stoics  are  wrong — but  neither  do  sense 
experiences  meet  every  question.  Indeed,  in  combating 
Mandeville,  the  author  of  the  "Fable  of  the  Bees,  or 
Private  Vices,  Public  Benefits,"  1714,  who  sermonized 
on  the  merits  of  elegant  leisure  procured  at  the  expense 
of  the  common  man's  toil — in  warning  against  this  fal- 
lacy Hume  was  impelled  to  make  much  of  a  spectator 
within  us,  somewhat  in  the  manner  ordinarily  associated 
with  Adam  Smith. 

Various  British  moralists  endeavored  thus  to  give 
hedonism  a  social  value,  Cumberland,  Tucker,  and  Paley 
relying  upon  reason,  just  as  Locke  had  done,  while  Hume, 
Smith,  and  Ferguson  pointed  to  benevolence  or  sympathy, 
that  is  to  the  sentimental  side  of  human  nature. 

To  illustrate  with  a  few  instances  apart  from  what 
has  been  said  about  Hume. 

Cumberland  in  1672  wrote:  "The  greatest  benevo- 
lence of  every  rational  agent  toward  all  the  rest  con- 
stitutes the  happiest  state  of  each  and  all  of  the  benevo- 
lent, so  far  as  it  is  in  their  own  power;  and  it  is  neces- 
sarily  requisite   to   the   happiest    state   which   they    can 


Chart  One  —  Genealogy  of  British  Utilitarianism 

Psycholoay  Greek  Metaphysics^  Bi|>le 


Christian  Theology 


Empiricism 
Epicureanism     Stoicism 


Pleasure  as  Qualities  of 

Quantify  only  Pleasure  (Cum- 

(Gay,   Hartley,  berland,  Locke, 
Tucker,  Paley)  Berkeley) 


/"BenthamN 
Vjas.  Mlli; 


Intuitionism 


Qualities  of 

Conduct 

(Hume,  Smith, 

Ferguson) 


Emotional  Basis 
of  Moral  Conduct 

(Shaftesbury, 
Hutcheson,  Brown) 


Rational  Basis 
of  Moral  Judg- 
ments (Cudworth, 
Clark,  Butler) 


J.  S.  Mill 


48 


NATURALISM  49 

attain;  and  therefore  the  common  good  is  the  supreme 
law."  ^'^  From  the  Third  Earl  of  Shaftesbury  whose 
"Characteristics"  were  as  original  as  they  proved  influ- 
ential, this:  "If  by  the  natural  constitution  of  any  ra- 
tional creature  the  same  irregularities  of  appetite  which 
make  him  ill  to  others  make  him  ill  also  to  himself,  and 
if  the  same  regularity  of  affections  which  causes  him  to 
be  good  in  one  sense,  cause  him  to  be  good  also  in  the 
other,  then  is  that  goodness  by  which  he  is  thus  useful 
to  others  a  real  good  and  advantage  to  himself.  And 
thus  virtue  and  interest  may  be  found  at  last  to  agree."  ^® 
And  from  Hutcheson,  the  immediate  predecessor  of 
Smith  in  the  theory  of  ethics :  "the  origin  of  moral  ideas 
is  the  moral  sense  of  excellence  in  every  appearance  or 
evidence  of  benevolence."  ^^  The  creator  of  the  world 
"has  given  us  a  Moral  Sense  to  direct  our  actions  and 
to  give  us  still  nobler  pleasures,  so  that  while  we  are 
only  intending  the  good  of  others  we  undesignedly  pro- 
mote our  own  greatest  private  good."  ^^ 

To  give  these  disquisitions  on  moral  sense  and  acquired 
moral  sentiments  their  proper  value  it  should  be  remem- 
bered that  Smith  as  the  founder  of  Naturalistic  economics 
in  England  followed  the  ethics  of  Hume  and  Hutcheson, 
adding,  to  be  sure,  his  own  theory  of  sympathy.  In  its 
beginnings  British  economics  thus  was  non-hedonistic. 
But  under  Ricardianism  a  decided  change  takes  place. 
From  there  on  the  hedonistic-utilitarian  concept  domi- 
nates economists  both  on  the  continent  and  across  the 
Channel,  so  that  Sensationalism  necessarily  forms  a  part 
of  our  historical  survey. 

"  Cumberland,  R.,  quoted  by  De  Laguna,  Th.,  in  his  Introduction  to 
the  Science  of  Ethics,  191G.  p.  193. 

"  Edition  of  1699,  vol.   2,  Inquiry  Concerning  Virtue  and  Merit. 

"  Inquiry  into  the  Original  of  Our  Ideas  of  Beauty  and  Virtue,  1720, 
vol.  2,  p.  vii. 

"  Ibidem. 


50       THE  DEVELOPMENT  OF  ECONOMICS 

But  a  propos  of  this  optimistic  view  of  human  nature 
entertained  by  the  Moral  Sense  philosophers,  was  it  any 
wonder  that  economics  started  with  free-trade  doctrines? 
Let  us  ponder  on  the  following  from  Ferguson,  the  author 
of  "Institutes  of  Moral  Philosophy,"  1767:  "The  ef- 
fect to  mankind  should  be  the  same,  whether  the  indi- 
vidual means  to  preserve  himself,  or  to  preserve  his  com- 
munity." ^^  "Tlie  interests  of  society  .  .  .  and  of  its 
members  are  easily  reconciled,"  **'  since  "love  and  com- 
passion are,  next  to  the  desire  of  elevation,  the  most 
powerful  motives  in  the  human  breast."  *^  Wasn't  this 
what  some  Physiocrats  believed,  and  what  especially  Vol- 
taire, in  his  unbounded  admiration  for  Saxon  genius, 
echoed  in  the  words :  "It  is  self-regard  that  also  pro- 
motes the  interests  of  others.  Thanks  to  our  mutual 
needs  we  help  one  another;  and  this  is  the  basis  of  all 
trade,  of  all  social  solidarity".?  ^^  The  identity  of  per- 
sonal and  national  interests  seemed  thus  proven  to  men 
who  had  no  particular  economic  issue  to  meet. 

Naturalism. — The  originators  of  this  notion  as  well  as 
of  the  Moral  Sense  were  the  Stoics  whose  naturalistic 
philosophy  permeated  a  great  part  of  seventeenth  and 
'eighteenth  century  literature.  Naturalism  was  the  se- 
quel to  dogmatism  of  the  ecclesiastical  sort.  With  the 
wane  of  faith  in  a  transcendent  God,  mysteriously  func- 
tioning in  a  trinity,  it  was  not  difficult  for  thinkers  to 
bring  God  to  earth  through  nature  herself.  It  was 
shown  that  nature  is  not  sinful  but  wholesome,  that  man 
could  not  be  fundamentally  bad  since  God  had  made  him 
as  He  had  created  heaven  and  earth,  and  that  the  con- 

39  Ferguson,  A.  Institutes  of  Moral  I'hilosoi)bj',  edition  of  17G7,  Part 
II,  ch.  2. 

tu  pY-rffuson,  A.     Kssay  on  a  History  of  Civil  Society,  Part  I,  ch.  9. 

*'  Ihidcin,  Part  I,  oh.  6. 

"  Quoted  by  I.iflhardt,  D.  Chr.  E.,  in  his  Geschichte  der  Christlichen 
Ethik,  18!)3,  p.  404. 


NATURALISM  51 

Crete  things  of  daily  experience  were  as  fit  to  reveal  God 
as  the  sublimest  miracles  of  the  Church.  In  short,  the 
pre-Christian  view  of  God  and  universe  was  revived. 
Platonic  idealism  was  dropped  as  unnecessary  to  our  un- 
derstanding of  religion.  What  was  unintelligible  in 
dogma  was  largely  discarded,  and  what  science  had  said 
about  a  new  cosmology  did  service  as  proof  for  Imma- 
nence. God  was  everywhere.  The  cosmos  itself  incor- 
porated a  divine  plan,  a  product  of  reason  whose  replica 
was  the  human  mind. 

From  this  standpoint  then  the  mechanistic  presenta- 
tion of  the  world  was  plausible.  One  could  easily  lose 
sight  of  a  process  of  means  and  ends  such  as  orthodox 
Christianity  preached.  One  could  depict  life  as  in  a  sta- 
tionary, finished  state,  minimizing  the  difference  between 
hell  and  heaven.  What  evidently  accorded  most  with  the 
achievements  of  modern  science  was  the  depersonalization 
of  God,  i.e.,  the  identification  of  God  with  nature  in  all 
its  details,  and  the  fusion  of  reason  with  virtue. 

Guided  by  the  Stoics  the  modern  philosophers  thus 
drifted  toward  a  naturalistic,  static  conception  of  human 
institutions.  A  state  of  nature  Avas  preached  in  which 
peace  reigned  (though  exceptional  writers  like  Hobbes 
imagined  just  the  opposite),  and  the  creatures  of  the 
earth  lived  in  perfect  adaptation  to  their  environment. 
Beast  and  man  alike  could  not  but  conduct  themselves 
otherwise  than  was  conducive  toward  their  welfare.  In- 
stinct was  but  the  affective  side  of  reason,  actions  giving 
effect  to  what  the  former  two  had  urged.  Man  was  social 
by  predisposition,  and  in  the  long  run  behaved  so  as  to 
enhance  the  fortunes  of  his  comrades,  no  matter  what 
moved  him  in  his  projects.  As  long  as  reason  presided 
men  had  nothing  to  fear  from  their  own  kind.  What 
had  gradually,  and  periodically,  brought  about  a  state 


52       THE  DEVELOPMENT  OF  ECONOMICS 

of  misery  among  men  was  their  own  falsification  of  na- 
ture's dictates.  Institutions  were  subject  to  errors,  and 
these  would  have  to  be  corrected  if  progress  was  to  be 
permanent ;  but  things  would  right  themselves  naturally 
also,  since  God  had  meant  human  beings  to  be  worthy 
of  His  designs. 

A  variety  of  principles  were  deduced  from  this  main 
proposition,  such  as  the  possession  by  man  of  certain 
inalienable  rights  of  a  political  sort,  his  title  to  self- 
government  within  liberal  bounds,  his  erection  of  gov- 
ernments on  prearranged  terms,  a  contract  being  drawn 
up  to  define  the  mutual  rights  and  duties  of  governor  and 
subject.  Legislatures  had  powers  to  regulate  many 
things,  but  in  all  cases  the  human  law,  whether  military 
or  moral  or  economic,  was  but  a  reflex  of  an  underlying 
larger  rule  laid  down  by  God.  Or  if  it  was  not,  misfor- 
tunes were  Impending;  for  what  was  unnatural  was 
thereby  Immoral,  and  what  was  immoral  was  certain  to 
perish  In  time. 

There  were  men  of  course  who  ridiculed  the  idea  of  a 
government  by  contract ;  men  like  Hume,  Blackstonc,  and 
later  on  Bentham.  The  sensationallstlc-utilitarlan  psy- 
chology did  not  need  a  social  order  established  through 
the  artifice  of  a  compact.  And  there  were  also  prophets 
who  turned  Naturalism  to  strange  uses  in  education  and 
etiquette,  Rousseau  being  the  most  celebrated  instance 
of  this  other  cry  of  a  "return  to  nature."  One  need  not 
wonder  at  such  applications  of  a  mighty  concept,  If  one 
remembers  the  circumstances  of  the  time,  the  decadence 
of  morals  and  manners,  the  approach  to  bankruptcy  of 
kings  and  courtiers,  and  the  dissatisfaction  prevailing 
among  thoughtful  men  and  women  in  various  walks  of 
life.  But  at  tlie  core  Naturalism  was  an  abstraction  cal- 
culated to  systematize  a  litter  of  facts  and  fancies  per- 


NATURALISM  63 

talning  to  moral  philosophy.  The  burden  of  Naturalism 
was  the  desire  to  describe  human  relations  so  as  to  make 
life  rational  and  virtue  practicable.  An  imposing  array 
of  arguments  was  gradually  brought  together  to  con- 
vince readers.  In  several  fields  men  labored  to  find  a 
substitute  for  a  crumbling  creed.  Richard  Hooker, 
whose  great  work  on  the  "Laws  of  Ecclesiastical  Polity'* 
appeared  in  1594,  Althusius  and  Grotius,  Locke  and 
Montesquieu  and  Rousseau,  Pufendorf,  Burlemaquai  and 
Vattel — they  each  and  all  expounded  Naturalism.  Chris- 
tianity by  the  Deists  was  proven  to  be  as  rational  as  self- 
protection.  Revelation  now  turned  out  to  be  no  more 
than  an  axiomatic  truth.  The  Scriptures  were  vindi- 
cated in  new  style,  and  doubters  shown  to  be  arrant  knaves 
or  doddering  fools.  It  is  symptomatic  of  the  vogue  of 
Naturalism,  and  of  the  grip  it  had  on  professional  minds, 
that  as  staunch  a  utilitarian  as  W.  Paley  should  write 
(even  in  1785)  :  "Moral  philosophy,  morality,  ethics, 
casuistry,  natural  law  mean  all  the  same  thing,  namely 
that  science  which  teaches  men  their  duty  and  the  rea- 
sons of  it."  *^ 

The  best  use  of  Naturalism  was,  however,  made,  not 
in  ethics,  but  in  politics  where  popular  interest  was  so 
much  more  lively.  It  was  here  that  the  times  were  espe- 
cially ripe  for  a  close-knit  web  of  theories,  and  it  was 
here  that  empiricism  once  more  carried  off  the  palm  of 
victory,  securing  public  approval  when  idealistic  men 
like  Spinoza  or  Kant  could  hardly  make  themselves  heard. 

Political  philosophy  gained  in  the  eyes  of  the  people 
chiefly  because  great  issues  were  being  fought  between 
ruler  and  the  ruled. 

Since  the  Renaissance  powerful  nations  had  come  into 

"  Paley,  W.  Principles  of  Moral  and  Political  Philosophy,  first  edi- 
tion. Book  I,  eh.   1. 


54       THE  DEVELOPMENT  OF  ECONOMICS 

being.  Millions  of  inhabitants  swore  allegiance  to  one 
flag.  Hundreds  of  thousands  of  square  miles  of  land 
had  come  under  the  scepter  of  this  or  that  dynasty.  The 
long  struggle  against  the  papacy  had  compelled  Protes- 
tants to  find  defense  for  their  impious  deed.  Secular 
power  had  to  be  declared  independent  of  the  clerical,  and 
if  convenient  even  exalted  at  the  expense  of  the  citizen. 
A  divine-right  theory  of  kings  was  thus  forged  by  degrees 
out  of  pieces  furnished  by  the  New  Testament  and  the 
Church  itself  during  the  Middle  Ages.  Monarchs  every- 
where had  exercised  despotic  powers,  and  on  the  Euro- 
pean continent  clung  to  them  for  many  generations. 

Yet  a  reaction  against  this  exaltation  of  the  Crown 
set  In  among  certain  religious  sects.  Calvinism  and  In- 
dependentism  meant  self-determination  in  more  senses 
than  one.  Recalcitrant  kings  who  would  not  espouse  the 
cause  of  great  religious  reformers  were  anathematized 
and — metaphorically  speaking — deposed.  In  France  the 
Huguenots,  in  England  the  Puritans  and  minor  sects,  In 
the  Netherlands  nationalists  raised  the  banner  against 
absolute  dominion.  Taxes  furnished  a  welcome  bone  of 
contention.  Personal  government  was  decried  and  re- 
sponsibility to  the  people  deemed  imperative.  First  the 
revolution  of  the  Netherlands  in  1579,  which  was  cx- 
jDressly  justified  by  reference  to  a  social  compact;  then 
the  constitutional  battle  in  England,  the  final  episode 
being  the  writing  of  the  Bill  of  Rights  in  1689  and  the 
Act  of  Settlement  a  few  years  later;  then  the  revolt  of 
the  American  colonies  under  cover  of  the  Rights  of  Man ; 
and  last  not  least  the  French  Revolution  which  gave  the 
coup  de  grace  to  so  many  European  survivals  of  the 
Dark  Ages ! 

It  is  not  hard  to  see  tliat  Naturalism  could  give  an 
air  of  irrefutable  logic  to  such  events,  to  the  demands 


NATURALISM  65 

actuating  pamphleteers,  political  leaders,  or  idols  of  the 
mob.  Tlie  thought  that  nature  had  made  all  men  equal, 
and  endowed  them  with  the  inviolable  right  of  pursuing 
happiness,  this  slogan  had  force  when  motives  were  not 
lacking.  The  dictum  of  Rachel  in  his  "Law  of  Nature 
and  Nations,"  1676,  that  "since  man  is  constituted  by 
nature  a  social  animal,  and  it  is  his  peculiar  task  to  live 
according  to  reason  so  that  in  civil  life  he  may  find  con- 
stant occupation  in  well-doing,  Divine  Providence  has 
prescribed  rules  of  life  which  are  the  best  suited  to  his  ra- 
tional and  social  nature,  and  these  are  the  very  rules  of 
nature  .  .  .  ,"  **  this  viewpoint  paved  the  way  for 
Locke's  "Essay  on  Government"  of  1690,  in  which  con- 
stitutionalism won  its  finest  victory.  From  then  on  the 
future  of  popular  sovereignty  was  assured. 

Furthermore,  by  means  of  this  specialization  social  sci- 
ence itself  benefited  appreciably,  for  ere  long  the  dif- 
ference between  jurisprudence  and  kameralistic  studies 
became  apparent.  If  the  stoic  philosophy  was  used  to 
sanctify  paternalism,  it  also  gave  a  mighty  impetus  to 
international  law,  to  "the  law  of  nations,"  as  it  was  at 
first  baptized.  Ethics  eventually  was  separated  from 
jurisprudence,  and  both  from  economics.  A  subdivision 
of  inquiries  went  on  during  the  eighteenth  century  that 
helped  to  determine  the  form  of  Smith's  "Wealth  of  Na- 
tions." 

Statistics  and  Historiography. — But  finally,  something 
had  likewise  been  contributed  by  statisticians  and  his- 
torians. Much  valuable  material  in  the  earlier  litera- 
ture of  economics  had  been  garnered  by  these  investi- 
gators who,  while  faithful  workers  in  quest  of  truth,  were 

"  Rachel,  S.  On  the  Law  of  Nature  and  Nations,  1676,  edition  of 
Carnegie  Institution  of  Washington,  D.  C,  1916,  vol,  2,  p,  8. 


66      THE  DEVELOPMENT  OF  ECONOMICS 

certainly  not  familiar  with  the  reasoning  of  psycholo- 
gists or  of  Physiocrats. 

In  its  first  stages  statistics,  to  be  sure,  meant  no  more 
than  a  collection  of  facts  relating  to  politics.  Data  were 
compiled  to  reveal  the  military  or  economic  powers  of  a 
state,  comparative  studies  taking  the  name  of  Cos- 
mography. The  growth  of  nations  and  the  mercantilis- 
tic  policy  of  statesmen  lent  interest  to  such  investiga- 
tions. Resources  were  catalogued  and  brought  to  the 
reader's  attention  so  as  to  appeal  to  his  patriotism. 
Physical  and  commercial  geography  came  in  for  their 
share  of  consideration,  though  not  infrequently  accuracy 
was  sacrificed  for  the  sake  of  impressiveness.  In  Eng- 
land Harrison's  "Description  of  England,"  1577,  is  a 
fair  type  of  what  statistics  include  at  tliat  time,  and 
what  in  the  compiler's  opinion  the  people  wanted.  On 
the  continent  the  "RespubllcEe  Elzeviranae"  of  Leyden  by 
Holland  publishers  (1626—)  were  widely  known  and 
used,  some  sixty  states  being  comprised  In  the  collection. 
The  German  Kameralists  wrote  bulky  tomes  on  "Staatsbe- 
schreibung,"  that  of  Conring,  1660,  being  especially  well 
received.  Thomaslus,  the  chief  exponent  of  German  Ra- 
tionalism in  those  days,  not  only  was  the  first  to  dare  use 
his  mother  tongue  In  lectures  at  the  University  of  Leip- 
zig, but  also  introduced  In  1694<  Statistics  as  one  of  his 
regular  courses.  Still  later  Achlnwall  (174'9)  published 
his  "Outlines  of  the  New  Political  Science,"  In  which  the 
description  of  political  facts  was  subordinated  to  an  his- 
torical treatment ;  while  In  England  Salmon's  "Present 
State  of  All  Nations"  had  long  circulated  as  a  work  of 
distinct  merit. 

Demographic  records,  too,  became  plentiful  about  this 
time.  The  oldest  official  data,  namely  church  registers  of 
birth,  death,  and  marriage,  were  preserv^ed  with  a  grow- 


NATURALISM  67 

ing  appreciation  of  their  value  for  future  generations, 
and  clerks  put  in  charge  soon  after  the  Reformation. 
Vital  statistics  in  general  were  first  compiled  in  Spain 
at  the  end  of  that  century,  though  no  systematic  in- 
quiries appear  to  have  been  made  until  much  later.  It 
was  the  age  of  the  Enlightenment  that  set  a  good  ex- 
ample here  as  in  other  things,  and  gave  to  statistics  at 
once  a  standing  among  other  fields  of  investigation.  In 
Prussia  the  first  census  dates  from  1719.  Nearly  a  hun- 
dred years  later  the  bureau  was  reorganized  and  put  on  a 
permanent  basis — possibly  another  one  of  those  efforts 
made  at  that  time  to  infuse  life  into  a  nearly  defunct 
state,  whose  very  existence  depended  on  the  goodwill  of 
Napoleon.  In  France  the  beginnings  were  equally  hum- 
ble and  devoid  of  immediate  results,  but  by  1820  this 
branch  of  the  public  service  had  been  definitely  recognized 
as  important  for  many  governmental  needs. 

Apart  from  official  undertakings,  however,  those  of  a 
private  origin  must  be  considered,  and  these  take  us  back 
far  into  the  seventeenth  century.  England  once  more 
seems  to  have  led  the  way.  It  was  there  that  Graunt, 
1662,  published  his  "Natural  and  Political  Observations 
Upon  Bills  of  Mortality."  It  was  there  that  Halley,  the 
discoverer  of  the  comet  named  for  him,  gave  out  his 
figures  on  death-rates  and  population  in  1693.  King's 
and  Petty's  tables  gained  recognition  at  once  and  served 
as  an  incentive  for  similar  studies  by  German  economists. 
In  1698  we  hear  of  a  life-insurance  company  founded  for 
the  purposes  of  protecting  individuals  against  risks 
through  death.  Population  was  watched  increasingly  as 
an  index  of  prosperity  and  national  power,  the  pessimis- 
tic attitude  of  Malthusian  days  being  as  yet  unknown; 
for  there  was  enough  to  eat,  and  manufacture  still  played 
a    minor    role   in    national    life.     Indeed,    on    theological 


58       THE  DEVELOPMENT  OF  ECONOMICS 

grounds  the  movements  of  population  were  regarded  as 
a  sign  of  divine  intentions,  as  for  instance  in  the 
*'Betrachtungen  iiber  die  GottKche  Ordnung  in  den 
Veranderungen  des  Menschhchen  Geschlechts"  (1767)  by 
J.  P.  Suessmilch.  In  other  words,  statistics  had  not  so 
far  been  treated  as  an  exact  science,  following  principles 
of  logic  and  mathematics,  but  rather  as  a  field  for  in- 
formation that  might  prove  suggestive  to  monarchs  and 
tax  collectors.  The  state  almanacs  appearing  from 
1700  on  answer  this  purpose,  as  well  as  periodicals  and 
textbooks  for  collegiate  use,  which  by  the  middle  of  the 
century  had  reached  quite  a  finished  form. 

Still,  it  may  be  argued  that  precision  was  aimed  at 
more  and  more,  and  that  mathematicians  by  their 
treatises  on  probability  did  give  a  fillip  to  statistical  in- 
terests. For  while  mathematics  was  not  indispensable 
to  a  thorough  cultivation  of  the  field,  it  could  not  fail  to 
economize  labors  or  to  corroborate  inferences  from  par- 
ticulars near  at  hand.  Assuming  a  given  number  of 
variables,  laws  of  recurrence  could  be  stated  quantita- 
tively, per  block  of  events,  per  class,  or  per  unit  of  time. 
And  it  deserves  noting  that  mainly  on  this  account  sta- 
tistical investigations  strengthened  a  belief  in  social  laws 
which  govern  human  events,  just  as  pliysical  events  were 
already  known  to  obey  laws.  Thus  the  calculus  of  New- 
ton and  Leibniz  bore  indirectly  upon  the  rise  of  social 
science.  Thus  Pascal's  and  Fermat^s  books  on  proba- 
bility in  games  of  chance,  published  in  1660,  stimulated 
statistical  inquiry.  Thus  Bernouilli*s  "Ars  Conjec- 
tandi"  of  1713,  and  the  later  publications  of  Euler,  were 
in  keeping  witli  tendencies  of  tlic  time. 

Historians,  on  their  part,  kept  abreast  of  events  by 
widening  their  field,  by  subordinating  chronology  to  syn- 
thetic accounts  of  the  past,  by  searching  for  a  unifying 


NATURALISM  59 

principle  back  of  human  records.  The  Renaissance  fur- 
nished the  raw  materials  for  the  new  science;  the  seven- 
teenth and  eighteenth  centuries  turned  out  finished  prod- 
ucts that,  in  some  cases,  were  worthy  to  be  ranked  with 
the  best  of  our  own  age. 

However,  it  was  the  rationalistic  temper  of  these 
histories  rather  than  their  contents  that  must  impress 
us;  and  it  was  the  idea  of  a  philosophy  of  history 
that  most  of  all  prompted  men  to  study  the  socio- 
economic aspects  of  human  evolution.  Pioneers  like  Bos- 
suet,  Vico,*^  and  Montesquieu  for  tliis  reason  exerted  an 
influence  upon  the  founders  of  economics.  Adam  Smith 
had  good  precedents  when  he  devoted  a  large  portion  of 
his  "Wealth  of  Nations"  to  a  resume  of  former  economic 
systems !  To  sum  up  long  periods  of  time  under  a  single 
viewpoint  was  no  longer  a  novelty  in  his  day.  In  France 
Turgot  had  published  his  "Successive  Advances  of  Human 
Nature,"  1750;  Voltaire  several  comprehensive  histories 
including  his  "Essay  on  Morals  and  Customs,"  1756;  and 
Condillac  his  "Universal  History"  in  1775.  Among  Eng- 
lish works  deserve  notice  Ferguson's  "Essay  on  the  His- 
tory of  Civil  Society,"  1767,  and  preeminently,  of  course. 
Gibbon's  "Decline  and  Fall  of  the  Roman  Empire,"  the 
first  volume  of  which  appeared  In  1776.  Germany  also 
could  point  to  meritorious  works,  for  Instance  to  Iselln's 
"Philosophical  Speculations  on  a  History  of  Mankind," 
1764;  to  Schlozer's  "General  Scandinavian  History," 
1772,  which  at  the  time  enjoyed  great  popularity;  to 
Wegelln's  "Memoirs  on  a  Philosophy  of  History,"  1776, 
and  to  the  essays  of  Moser,  Lessing,  and  Herder  who 
combined  literary  excellence  with  loftiness  of  thought. 

Genealogy  of  Social  Science. — Without  going  further 

**  See  his  Principes  do  la  Philosophie  de  I'Histoire,  translated  from  the 
Italian  by  Michelet,  J..  1835.  Vico  frankly  admits  his  indebtedness  to 
Hugo  Grotius,  the  Dutch  jurist. 


Chart  Two — Genealogy  o£  Social  Science 


Greek  Thought 

Psychology    Mathematics     Metaphysics 


Anno 
^Poroini 


NATURALISM  61 

into  this  side  of  the  genesis  of  economics,  one  cannot  help 
being  struck  with  the  abundance  of  materials  that  had 
by  1770  been  laid  up,  ready  for  anybody  that  should  wish 
to  convert  economics  into  a  science.  A  long  period  of 
preparation  was  at  last  to  bear  fruit.  As  the  accompany- 
ing chart  will  show  at  a  glance,  the  ultimate  sources  of 
economics  are  to  be  sought  in  Greek  philosophy ;  but, 
more  precisely  taken,  the  antecedents  lie  in  the  two  cen- 
turies following  the  Renaissance.  Christian  theology 
proved  of  no  import,  though  it  did  influence  modern 
ethics.  On  the  other  hand  modern  science,  especially 
through  the  researches  that  culminated  in  the  Newtonian 
system,  was  the  direct  occasion  for  men's  asking  whether 
physics  and  psychics  might  not  be  linked  by  a  common 
principle  in  law  and  logic.  With  the  aid  of  these  data 
psychology  opened  up  new  vistas,  and  ere  long  provided 
a  basis  for  a  theory  of  knowledge  as  well  as  for  a  theory 
of  ethics.  Together  these  lines  of  investigation  forced 
upon  able  thinkers  the  conclusion  that  the  study  of  the 
social  environment  was  worth  while,  that  master  prin- 
ciples might  be  unearthed,  that  rules  might  be  prescribed 
for  the  furtherance  of  public  well-being,  and  for  the  moral 
elevation  of  individuals.  Z>^scription  and  prescription 
were  not  as  yet  rigidly  sundered,  though  the  possibility 
suggested  itself.  What  was  evident,  however,  was  the 
growing  desire  to  compete  with  physicists  and  mathema- 
ticians. Both  in  France  and  in  England  men  arose  who 
attacked  this  problem,  thereby  launching  a  new  science, 
to  be  known  as  economics. 


CHAPTER  THREE 
NATURALISM  (Continued) 

II.  Physiocratism 

Underlying  Ideas. — The  Physiocrats,  or  Economists 
as  they  called  themselves  with  a  certain  pride  in  their 
work,  may  justly  be  considered  the  founders  of  economics 
because  they  were  the  first  to  study  social  processes  from 
the  standpoint  of  law  and  causation,  exactly  as  Newton, 
for  example,  had  done  in  another  field.  They  applied  to 
the  body  politic  what  English  empiricists  had  originally 
tried  to  discover  in  individual  human  nature,  namely  a 
principle  of  regularity  in  the  occurrence  of  events,  ac- 
cording to  which  they  might  be  connected  and  perhaps 
predicted  just  as  astronomers  had  explained  the  varied 
phenomena  of  the  heavens.  It  was  shown  that  wealth 
circulated  and  satisfied  several  requirements  essential  to 
national  welfare,  the  inference  being  at  the  same  time 
that  something  definite  might  be  done  to  promote  this 
tendency  toward  growth  and  progress.  Not  that  all  mem- 
bers of  the  Physiocratic  group  held  the  same  opinion  in 
details,  but  rather  that  they  shared  like  views  on  funda- 
mentals, and  thus  furnished  a  basis  for  literary  and  social 
activity  that  was  the  more  effective  since  the  needs  of  the 
times  favored  it. 

For  France  under  Louis  XV  had  gradually  lost 
its  prestige  in  Europe.  The  strength  of  the  country 
had  been  sapped  in  bloody  and  rather  useless  wars  and 

62 


NATURALISM  63 

Pyrrhean  victories,  which  pleased  no  one.  Profligacy  at 
court  had  more  than  off"set  the  frugality  of  the  peasant. 
Pomp  and  ceremony  could  not  compensate  for  the  grow- 
ing deficits  of  the  exchequer.  The  popularity  of  Louis 
XIV  gave  way  to  a  bare  tolerance  for  his  great-grandson, 
and  this  to  a  hearty  contempt  for  the  prince  who  came 
to  the  throne  in  1774.  From  then  on  the  government  was 
at  the  mercy  of  financiers  who  were  expected  to  remedy 
overnight  the  evils  that  had  been  engendered  by  a  century 
of  improvidence  and  autocracy. 

Thus  one  might  say  that  what  the  ministers  of  the 
king  vainly  endeavored  to  accomplish  by  near-at-hand 
measures,  such  as  loans  and  a  curtailment  of  feudal  privi- 
leges, the  Physiocrats  meant  to  do  with  their  study  of 
production  and  circulation.  To  them  the  problem  was 
definite,  and  a  solution  possible  by  mathematical  demon- 
stration. They  relied  upon  their  philosophy  to  show  the 
natural  order  underlying  what  on  the  surface  was  so 
chaotic.  They  sought  to  vindicate  the  prior  rights  of 
landlord  and  farmer  who,  by  virtue  of  their  strategic 
position,  could  make  or  mar  the  country  in  conjunction 
with  the  Crown.  In  the  long  run,  their  Economic  Table 
purported  to  show,  public  finance  must  vary  with  private 
cost-keeping  and  spending.  From  nature  alone  all  sur- 
plus came,  but  treasuries  would  be  empty  as  long  as 
there  was  misappropriation  at  the  source. 

In  what  may  be  called  the  premises  of  Physiocratism 
there  is  no  more  merit  than  in  most  of  the  eighteenth 
century  Naturalism.  We  find  the  Stoical  viewpoint  de- 
veloped in  theories  of  a  state  of  nature,  laws  of  nature, 
and  natural  rights.  What  Hooker  and  Grotius,  Locke 
and  Pufendorf,  Vattel  and  Montesquieu  had  said  in  their 
treatises  on  sovereignty  or  on  international  law,  the 
Physiocrats   repeated  with  little   or  no   variation.      The 


64      THE  DEVELOPMENT  OF  ECONOMICS 

static  rationalistic  outlook  which  had  so  distinctly  in- 
spired English  moralism,  besides  coloring  psychological 
nomenclature,  also  predominated  in  France.  Nay,  French 
philosophy  was  so  much  beholden  to  the  pathfinders  across 
the  Channel  that,  in  perusing  its  pages,  one  feels  brought 
back  to  the  Restoration  period  of  British  speculation. 

It  seemed  quite  sufficient  for  the  Physiocrats  to  say: 
"The  natural  order  is  merely  the  physical  constitution 
which  God  Himself  has  given  the  universe."  ^  Or :  "Natu- 
ral law  is  the  right  a  man  has  to  things  for  the  enjoy- 
ment thereof."  ^  And  for  this  reason,  "to  secure  the  great- 
est amount  of  pleasure  with  the  least  possible  outlay 
should  be  the  aim  of  all  economic  effort."  ^  Mainly  in 
succeeding  in  this  policy  the  natural  order  would 
be  realized  among  men.  Nature  meant  prevision  and 
precision.  God  had  willed  it  so.  There  was  no  need 
of  devising  means  for  saving  an  individual  or  a  nation, 
provided  only  nature  was  correctly  understood,  and  being 
understood,  followed  implicitly  in  the  management  of 
one's  affairs. 

The  laws  regulating  the  movements  of  the  planets  or 
the  interactions  of  matter,  were  active  in  the  organic 
world  also,  and  especially  in  human  society  where  com- 
plexity so  obscured  the  fundamentals.  Nature  was  all- 
wise  and  beneficent.  Its  reign  extended  over  everything. 
What  God  had  planned  in  the  creation  of  the  universe 
was  not  to  be  supposed  to  shut  out  mankind.  Rather,  if 
man  made  laws  it  was  only  by  way  of  reflecting  the  higher 
and  more  general  reason  in  things,  the  legislator,  in  this 
sense,  modeling  his  positive  order  on  tlie  eternal  natural 
which  pervaded  the  cosmos.     Considered  from  one  point, 

'  See  Dupont  de  Nemours'  Physiocratic,  ITGT-GS,  Introduction  to 
Quesnay's  Works. 

'  Collection  des  Principaux  Economistcs,  by  Daire,  Eugene,  1846, 
vol.   1  ;  Quesnay,  Le  Droit   Naturel,   p.  4(5. 

'  Ibidem,  Quesnay's  Dialogues. 


NATURALISM  66 

therefore,  Naturalism  meant  the  acknowledgment  of  con- 
tinuity from  physics  to  psychics.  It  was  denied  that 
two  different  sets  of  law  ruled  environment  and  society. 
It  was  taken  as  almost  self-evident  that  the  apparent 
gulf  is  simply  an  illusion  due  to  man's  unbalanced  mind 
or  faulty  vision.  If  men  would  think  and  probe  into  the 
inner  meaning  of  life  they  would  soon  admit  their  impo- 
tence in  matters  of  morals  or  government.  What  could 
they  think  of  that  had  not  from  the  beginning  been  known 
and  assigned  its  place?  What  were  acts  of  parliament 
if  not  natural  law  applied,  or  in  other  words  inferior 
copies  of  a  wisdom  older  than  man? 

Hence,  viewed  from  another  angle,  there  need  be  no 
fear  of  misfortune  so  long  as  the  natural  economy  was 
left  undisturbed.  For  God  was  benevolent  and  fatherly 
in  His  solicitude.  Things  would  right  themselves  even  if 
for  a  while  they  went  badly.  Human  nature  was  meant 
to  gain  by  the  physical  arrangement,  not  to  suffer 
unnoticed.  The  very  inequality  among  men  with  re- 
spect to  their  innate  aptitudes,  capacities,  tastes,  and 
passions  was  a  means  for  endless  progress.  Division  of 
rights  and  duties  rested  on  this  important  fact.  The 
convenience,  nay  necessity  of  private  property,  was  thus 
logically  assured.  Individuality  of  men  could  not  be  lost 
without  defying  the  same  principles  that  differentiated 
life  below  man.  It  was  rational  that  a  variety  of  interests 
should  exist,  and  that  Reason  itself  should  guide  men  in 
their  everyday  economic  cares.  For  how  could  they  win 
out  except  by  continual  adaptation  of  their  faculties  to 
the  precepts  ordained  by  God?  And  how  could  there  be 
adaptation  without  poise  and  diligence,  i.  e.,  reason? 
Happiness  was  morality  suited  to  nature.  It  was  pro- 
curing the  utmost  pleasure  through  right  use  of  energy 
and    intelligence.      In    such    observance    of    natural    dif- 


66       THE  DEVELOPMENT  OF  ECONOMICS 

ferences,  wrought  everywhere  into  an  orderly  system  by 
Providence,  lay  the  promise  of  justice  to  all.  Interests, 
no  matter  how  divergent,  were  reconciled  by  divine  fore- 
thought, which  man  could  scarcely  overlook  if  anxious 
to  prosper.  Or  in  the  words  of  Mercier  de  la  Riviere: 
"The  movements  of  society  are  spontaneous  and  not  arti- 
ficial, and  the  desire  for  joy  which  manifests  itself  in  all 
its  activities  unwittingly  drives  it  toward  the  realization 
of  the  ideal  type  of  state."  All  was  well  if  nature  held 
sway.  Optimism  was  the  right  note,  not  apprehension 
over  ills  that  man  had  foolishly  brought  upon  himself. 

Two  characteristics,  consequently,  play  their  part  in 
Physiocratism,  viz.,  first,  a  belief  in  distinctions  between 
men,  lest  order  in  society  become  anarchy;  and  secondly, 
an  easy  faith  in  the  goodness  of  men  which  reflected  God's 
own  goodwill  and  needed  but  a  sufficient  amount  of  free- 
dom to  bring  bounteous  returns.  Order  was  the  quintes- 
sence of  reason.  Man  was  a  rational  creature  and  could 
not  forget  his  supreme  responsibilities  without  sinking 
into  barbarism.  Inborn  differences  had  always  existed 
and  probably  would  not  disappear.  There  had  to  be 
governors  and  governed,  landlords  and  farm-hands. 
Private  property  was  by  divine  sanction  no  less  than  by 
the  reason  of  things  which  the  whole  nature  of  man  and 
the  records  of  history  attested  to.  Rights  were  real,  but 
they  diff'ered  and  served  several  ends,  not  all  of  them 
obvious  perhaps  to  the  untutored. 

Yet,  as  against  this  acceptance  of  the  Ancient  Regime, 
the  Physiocrats  cherished,  in  addition,  ideals  strikingly  at 
variance  with  it.  So  much  so  indeed,  that  one  is  tempted 
to  class  them  with  the  philosophers  that  forecast  the 
Revolution.  For  in  expatiating  complacently  on  the 
natural  order  of  things,  one  conformable  to  reason  and  the 
real  designs  of  the  Creator,  tlie  Physiocrats  unavoidably 


NATURALISM  67 

drew  a  contrast  between  France  as  it  was  and  as  it  might 
be.  Moreover,  they  were  impelled  to  deprecate  govern- 
mental interference,  or  for  certain  purposes  to  condemn 
it  altogether.  If  men  had  the  qualifications  to  measure 
nicely  their  own  interests,  if  Providence  stood  sentinel  so 
dangers  might  be  eschewed,  if  physical  laws  extended  to 
social  happenings  no  less  than  to  the  motions  of  matter, 
then  manifestly  it  was  absurd  to  hem  in  men*s  enterprise  at 
all  points.  To  hinder  might  be  bad,  but  to  help  even 
worse.  Or,  as  the  elder  Mirabeau  delivered  himself:  Leg- 
islation, if  conformable  to  nature,  was  unnecessary,  and 
if  in  violation  of  it,  certain  of  defeat,  for  in  the  long  run 
nature  was  the  strongest.  Mistakes  could  be  made,  but 
they  must  not  become  policies  parading  as  virtue.  To  let 
alone  was  a  good  maxim  for  statesmen  lest  their  zeal 
take  them  too  far.  Natural  instincts  could  be  trusted 
to  do  much  good. 

However,  there  were  other  grounds  on  which  Physio c- 
ratism  looked  askance  at  paternal  methods,  and  in  ad- 
vancing them  philosophy  was  abandoned  for  economics 
in  the  narrower  sense. 

Forerunners  had  of  course  been  developing  the  various 
views  which  proved  exceedingly  valuable  without  turning 
economics  into  a  science.  What  the  Mercantilists  and 
Kameralists  had  stored  up  as  the  elements  of  an  art  of 
political  economy,  the  French  school  utilized  in  part 
under  the  influence  of  English  writers.  But  what  entitles 
the  Physiocrats,  as  remarked  before,  to  the  credit  of  hav- 
ing founded  the  science  of  economics  is  their  unambigu- 
ous reference  of  economic  particulars  to  a  world  order 
in  which  law  is  everything,  in  which  matter  and  mind 
obey  a  principle  of  motion  or  circulation,  in  which  by 
Design  above  man  his  activities  come  to  express  measur- 


68      THE  DEVELOPMENT  OF  ECONOMICS 

able  relations,  ratios  as  in  production,  or  rates  as  in  the 
course  of  progress. 

From  this  standpoint  it  was  natural  for  the  Physio- 
crats to  emphasize  the  collectivistic  norm  rather  than  the 
individualistic,  even  though  they  preached  Laissez  Faire 
and  sincerely  approved  of  the  social  stratification  of 
their  day.  They  ended  with  the  individual  because  they 
believed  in  God,  but  they  began  with  inert  matter  and 
the  weal  of  nations  because  they  saw  Him  through  na- 
ture. The  cult  of  nature  was  the  reaction  of  modem 
times  against  medieval  theocracy.  The  study  of  sub- 
stance and  space  was  an  attempt  at  reconstructing  an 
older  personalism.  A  stress  upon  the  material  aspect  of 
life  was  wholesome  when  poverty  was  dreaded  and  En- 
lightenment adored. 

Economic  Doctrines. — So  the  Physiocrats  were  con- 
sistent in  defining  wealth  as  concrete  things  derived,  in 
one  way  or  another,  from  the  earth.  They  meant  stuff 
when  they  said  value.  They  pointed  to  articles  more 
than  to  the  services  back  of  them.  They  saw  the  fecun- 
dity of  the  soil,  or  of  the  species  inhabiting  it,  and  found 
nothing  in  trade  or  industry  to  equal  it.  The  wealth  of 
nations  was  its  soil  and  subsoil,  its  mines  and  forests,  its 
fisheries  and  water-power.  These  assets  might  be  used 
to  provide  a  steady  income.  A  surplus  sprung  from  the 
clever  exploitation  of  nature,  not  from  the  handicraft  of 
the  city-dweller.  Extractive  industries  paid  well;  the 
rest  was  a  change  of  forms  of  no  decisive  significance  for 
the  realm.  Each  season  nature  could  leave  a  net  product 
measurable  on  the  scales,  but  by  a  like  test  the  labors  of 
merchant  and  manufacturer  proved  futile.  It  was  a 
question,  ultimately,  of  knowing  to  what  uses  rawstufFs 
should  be  put.  If  a  certain  ratio  of  these  to  finished 
articles,  or  of  necessities  to  luxuries,  or  of  agricultural 


NATURALISM  69 

improvements  to  personal  services,  met  with  public  ap- 
proval, justified  by  the  welfare  of  the  nation  and  the 
needs  of  the  Crown,  then  well  and  good.  Otherwise  there 
was  no  use  boasting  about  industry  and  trade  balances, 
especially  if  the  sources  gave  out,  or  riches  were  em- 
ployed recklessly  for  the  amusement  of  some,  and  to 
the  undoing  of  others.  What  would  production  boot  if  it 
neglected  the  prior  rights  of  the  farmer?  Was  anything 
"produced"  if  no  quantitative  increase  could  be  ascer- 
tained? Was  wealth  more  than  stuff  from  the  social 
viewpoint,  or  at  least  could  any  occupation  compare  with 
the  agricultural,  supposing  the  primary  needs  of  a  nation 
were  at  issue?  In  a  crisis  production  had  to  aim  at  ma- 
terials first  of  all.  The  conversion  of  produce  or  other 
yields  of  the  earth  into  commodities  was  desirable,  but 
merely  auxiliary  to  the  general  end  which  was  surely 
the  prosperity  of  the  whole  kingdom. 

In  this  temper  the  Physiocrats  proposed  definitions  and 
classifications  of  toilers  that  could  not  last  in  a  competi- 
tive age.  Cost  keeping  took  on  a  peculiar  aspect,  for  it 
was  almost  socialistic,  the  books  being  kept,  as  it  were, 
for  the  nation  as  a  whole,  with  the  result  that  distribution 
became  an  impersonal  affair  between  three  or  four  groups 
of  the  population,  not  at  all  traceable  by  the  pricing 
process  which  obtained  as  widely  almost  in  eighteenth 
century  France  as  in  Ricardian  England. 

Budgeting  was  involved  in  the  attempt  at  describing 
the  cycle  of  wealth  which  annually  repeated  itself  in  har- 
mony with  other  rotations  such  as  for  instance  that  of 
the  blood  in  the  human  body  or  the  orbits  of  the  planets. 
It  was  seen  that  agriculture  necessitated  several  kinds 
of  funds,  one  to  buy  stock  and  implements,  a  second  to 
improve  the  grounds,  a  third  to  supply  seed  and  like 
materials  seasonally  renewable,  and  perhaps  a  fourth  to 


70      THE  DEVELOPMENT  OF  ECONOMICS 

take  care  of  expansion  of  business.  In  estimating  these 
amounts  and  tracing  their  returns  to  society  the  rela- 
tive position  of  industriahsts  or  servitors  on  the  one 
side,  and  of  tillers  or  proprietors  on  the  other,  chal- 
lenged attention.  The  cycle  of  expense  and  product,  of 
investment  and  surplus  could  be  pictured  as  occurring 
in  space,  as  covering  the  different  parts  of  the  country 
in  which  consumers  lived.  Or  it  could  be  understood  as 
an  act  of  apportionment  among  claimants  to  the  stock. 
Or  it  could  be  followed  as  a  continual  transformation  of 
materials  through  human  intervention,  many  ends  and 
classes  of  people  thus  being  satisfied. 

And  this  is  exactly  what  was  done.  Cost  was  not  a 
part  of  price,  but  an  outlay  by  the  only  real  producer 
— the  farmer.  Consumption  was  not  of  values,  but  of 
stuffs  taken  from  the  soil.  Capital  was  not  a  right,  but 
a  store  of  materials  fashioned  variously  so  as  to  aid 
rural  development.  Other  uses,  while  practical  enough, 
must  be  made  ancillary  to  this  one  of  singular  importance. 
Waste  was  folly  when,  and  because  usually,  a  charge 
against  agricultural  efficiency.  Individual  price  and  in- 
come could  not  matter  a  great  deal  since  the  problem  was 
the  strengthening  of  the  people  as  a  whole.  The  masses 
had  a  subsistence  wage.  Little  more  was  assumed  to  be 
necessary.  But  how  many  farms  there  were,  how  man- 
aged, and  what  form  finally  the  raw  materials  took,  that 
deserved  careful  consideration.  If  we  except  Turgot  or 
the  glosses  of  the  Physiocrats  proper,  we  shall  be  im- 
pressed with  the  neglect  of  questions  that  later  eco- 
nomics pronounced  to  be  of  central  significance. 

Significant  to  the  Physiocrats  were,  however,  certain 
applications,  such  as  the  reform  of  taxes,  the  restriction 
of  feudal  rights,  and  the  inauguration  of  greater  freedom 
in  industry  and  trade. 


NATURALISM  71 

The  latter,  as  stated  above,  was  advocated  partly  owing 
to  a  serene  reliance  upon  Providence  and  the  social  dis- 
position of  man,  and  partly  because  of  the  distinction 
made  between  farming  and  other  econcmic  pursuits.  For 
if  trade  and  industry  were  sterile  there  was  no  point  to 
protecting  them  artificially.  On  the  contrary,  it  might 
be  advisable  to  repress  such  activities  so  as  to  preserve  a 
right  balance  between  stuff  and  service  production.  And 
by  the  same  token  free-trade  within  national  boundaries 
would  be  salutary  since,  for  one  thing,  it  would  enhance 
the  mobility  of  the  agricultural  surplus,  and  for  another 
would  relieve  people  of  taxes  which  after  all  could  be 
borne  by  only  one  economic  class.  The  need  of  the  times, 
as  the  Physiocrats  saw  it,  was  greater  soil-production, 
less  luxury  and  waste,  and  a  more  equitable,  because  more 
scientific,  system  of  taxation.  Taxes  could  be  levied 
from  none  except  those  whom  nature  blessed  with  a 
natural  surplus.  What  the  soil  produced  over  and  above 
the  requirements  of  the  farmer,  that  was  a  genuine  bonus 
for  landlord,  industrialist,  trader,  and  professional.  Let 
the  taxes  fall  on  this  original  surplus.  Let  there  be 
stoppage  at  the  source,  if  administratively  feasible.  If 
collected  from  the  non-producers  it  will  mean  leakage 
and  probably  favoritism  for  undeserving  classes.  It  was 
for  the  landlord  to  decide  how  much  the  land  needed  in 
replacement  and  investment  sums,  but  after  that  any 
charge  made  upon  him  would  have  a  beneficial  restraining 
influence  on  the  mode  of  living  of  others.  The  non- 
producers  would  feel  the  check  the  more,  the  severer  the 
standards  of  the  governments  in  its  undertakings. 

Physiocratism,  in  short,  had  solidaristic  leanings  by 
the  force  of  its  premises  and  reasonings,  if  not  from  an 
intent  to  rectify  social  errors.  Driven  to  its  logical  con- 
clusion it  might  go  far  toward  a  subversion  of  the  old 


72      THE  DEVELOPMENT  OF  ECONOMICS 

political  order,  and  this  is  the  interpretation  put  upon 
it  by  some  contemporaries,  the  Revolution  being  only  a 
decade  or  two  away.  The  Physiocrats  not  only  espoused 
Enlightenment  in  certain  applications  of  their  own  view, 
but  they  were  in  accord  with  liberalism  as  an  antidote 
for  mercantile  fallacies.  They  stood  in  line  with  the 
rising  forces  that  proclaimed  Non-interference  as  a  first 
maxim  of  statesmanship. 

III.  Smithianism 

Underlying  Ideas. — Adam  Smith  was  not  a  successor 
of  Quesnay,  but  he  learned  something  from  him,  and 
besides  went  farther  in  his  analysis  of  the  economic 
process.  The  broader  interests  of  Physiocratism  were 
not  disavowed.  But  Smith  after  all  represents  a  different 
viewpoint  in  important  respects,  as  can  easily  be  seen 
from  his  life  history  or  his  two  principal  works  in  which 
most  of  his  professional  opinions  have  been  laid  down 
with  admirable  lucidity. 

In  Phj^siocratism  morality  is  a  detail  that  in  no  wise 
affects  its  fundamental  propositions.  The  mechanistic 
outlook  determines  the  course  of  reasoning  in  spite  of 
much  verbiage  about  a  beneficent  Providence.  Stoicism 
and  not  Christianism  furnished  the  main  weapons  of  de- 
fense. The  world  order  was  conceived  more  nearly  as  a 
play  of  forces  due  to  matter  in  motion,  than  as  an  organic 
growth  in  which  a  Supreme  Will  presided.  In  France 
both  materialism  and  mechanism  gained  a  firmer  foothold 
than  on  British  soil.  The  French  leaders  of  the  eight- 
eenth century  were  more  consistent  than  their  models  in 
England.  Metaphysics  from  the  start  had  meant  more 
to  the  former  than  to  the  latter,  and  in  the  analysis  of 
economic  processes  the  human  aspect  was  unconsciously 


NATURALISM  73 

slighted,  from  a  desire  to  be  precise.  Exact  economics 
was  in  vogue  among  the  Physiocrats  long  before  it  was 
revived  as  an  ideal  by  the  Utilitarians  and  Marginists. 
Hence,  in  scanning  the  pages  of  that  School,  one  is 
oppressed  by  a  sense  of  dryness,  of  sheer  scholastic  erudi- 
tion that  contrasts  poorly  with  the  picturesque,  invigor- 
ating exposition  of  the  great  Scotchman.  Much  food  for 
thought,  one  is  prone  to  lament,  but  only  for  those  who 
are  famishing  for  it ! 

Now,  this  was  not  the  style  of  Adam  Smith ;  nor  was 
he  given  to  a  hobby  of  speaking  in  the  abstract.  To  him 
the  individual  was  a  unit  and  center  both,  the  sole  object 
of  fruitful  stud}',  and  the  bearer  of  all  that  might  tend 
toward  progress.  Just  as  labor  with  him  became  more 
decisive  than  land,  just  as  morality  to  him  was  a  power- 
ful agent  for  directing  social  enterprise,  so  he  aimed  con- 
stantly at  illustrating  his  theorems  from  commonplaces  in 
which  the  purely  human  figured  at  least  as  prominently 
as  discussions  of  public  policy.  The  pragmatic  note  was 
less  often  sounded  than  b}^  his  French  colleagues,  yet  on 
the  whole  it  made  a  more  lasting  impression.  The  author 
of  a  "Theory  of  the  Moral  Sentiments"  was  not  likely  to 
be  misunderstood  by  an  interested  audience.  Or,  if  he 
had  dealt  less  summarily  with  the  systems  of  earlier  ages, 
there  was  the  title  itself  of  his  economic  treatise :  "An 
Inquiry  into  the  Nature  and  Causes  of  the  Wealth  of 
Nations," — evidently  a  request  that  people  think  dis- 
passionately of  the  welfare  of  all,  without  losing  sight 
of  the  individual's  share  in  the  drama. 

Smith  had  mused  long  over  the  ethical  values  of  life 
before  concentrating  upon  those  matters  which  to-day 
pass  as  the  whole  of  economics.  It  would  be  an  exaggera- 
tion to  say  that  his  "Wealth  of  Nations"  is  a  mere  by- 
product  of  his   larger  interests,  but   there   is   no   doubt 


74       THE  DEVELOPMENT  OF  ECONOMICS 

that  it  came  as  an  afterthought,  rather  late  in  his  career, 
a  monument  to  research  conducted  when  his  fame  as  a 
philosopher  was  already  assured.  For,  as  we  know  from 
his  duties  at  the  University  of  Glasgow,  where  he  began 
teaching  in  1751,  he  lectured  on  the  whole  field  of  Moral 
Philosophy — Natural  Theology,  Ethics,  Justice,  and  Po- 
lice coming  under  that  term.  Such  was  the  practice  on 
the  continent,  such  had  been  the  precedent  established 
by  his  own  teacher,  Francis  Hutcheson,  whose  doctrines 
influenced  him  profoundly.  As  an  adherent  of  Deism  it 
could  not  have  been  difficult  for  him  to  combine  theology 
with  jurisprudence,  but  it  is  suggestive  of  the  thorough- 
ness of  his  thinking  that  he  felt  constrained  to  separate 
Politics  from  Ethics.  For  in  the  former,  if  we  may 
believe  his  first  biographer,  Dugald  Stewart,  he  meant 
to  comprise  only  such  "regulations  which  are  founded, 
not  upon  the  principle  of  justice,  but  that  of  expediency, 
and  which  are  calculated  to  increase  the  riches,  the  power, 
and  the  prosperity  of  a  State."  * 

That  is  to  say,  not  only  was  a  line  of  demarcation 
drawn  between  the  realm  of  right  and  duty  on  the  one 
side,  and  that  of  utility  or  positive  law  on  the  other,  but 
furthermore  he  assigned  to  the  principles  of  political 
economy  a  preeminent  role  in  the  development  of  man- 
kind. Economics  to  him  was  a  crucial  point  in  the  turn- 
ing of  history,  not  simply  a  phase  dear  to  the  heart  of 
Farmers-General.  Consequently,  premises  had  to  be 
found  in  facts  of  no  immediate  bearing  upon  his  problem. 

Smith's  psychology,  to  be  sure,  does  not  occupy  a 
dominant  position  in  either  his  "Theory  of  the  Moral 
Sentiments,"  which  appeared  in  1759,  or  in  the  "Wealth 
of  Nations"  of  which  the  first  edition  came  from  the 
press  seventeen  years  later.     We  must  judge  mainly  from 

'Stewart,  D.     Works,  edit,  of  1829,  vol.  7,  p.  10. 


NATURALISM  YS 

Smith's  preliminary  studies  in  England  and  abroad,  from 
his  close  friendship  with,  e.g.,  Hume,  the  author  of  the 
"Treatise  of  Human  Nature"  (to  say  nothing  of  the 
several  "Inquiries,"  his  "Essays,"  and  his  "History  of 
England"),  and  from  his  casual  statements  on  the  sub- 
ject a  propos  of  his  ethics.  But  generally  speaking  his 
psychology  was  that  of  John  Locke  and  Hume.  We 
hear  him  hint  at  sensation  as  the  source  of  ideas,  at 
association  of  ideas,  and  the  dual  nature  of  man  who 
struggles  between  a  predisposition  to  suit  only  himself, 
and  a  recurrent  regard  for  the  weal  of  his  fellowmen.  As 
to  the  problem  of  knowledge  he  no  doubt  sided  with  the 
empiricists,  and  furthermore  agreed  to  the  tri-partite 
division  of  the  mind  into  the  faculties  of  will,  affection, 
and  cognition  as  it  was  current  at  that  time.  But  he 
stood  somewhat  apart  in  making  more  of  the  emotions 
than  even  Hume,  and  in  placing  a  sense  of  duty,  acquired 
in  the  natural  course  of  social  progress,  above  the  selfish 
weighing  of  pleasure  and  pain.  For  all  his  appreciation 
of  economic  values  he  refused  to  think  of  men  as  con- 
sumers only.  There  was  a  law  of  compensation  that 
punished  the  evil-doers  and  rewarded  the  friends  of 
righteousness.  Equality  in  some  respects  was  decreed 
by  God! 

Indeed,  his  Naturalism  carried  him  far  afield.  In  the 
"Wealth  of  Nations,"  for  instance,  he  informs  us  that  "by 
nature  a  philosopher  is  not  in  genius  and  disposition  half 
so  different  from  a  street-porter,  as  a  mastiff  is  from  a 
greyhound.  .  .  ."  "The  difference  between  the  most  dis- 
similar characters  .  .  .  seems  to  arise  not  so  much 
from  nature  as  from  habit,  custom,  and  education."  ^ 
This    of    course    squares    with    the   views    of    Hume    and 

» Wealth  of  Nations,  Book  I,  ch.  2.  Edition  used  here  is  that  of 
Everyman's  Library,   publ.   by  Button,  E.   P.,  and  Company,   New   York:. 


76      THE  DEVELOPMENT  OF  ECONOMICS 

with  a  growing  sentiment  among  political  philosophers, 
and  goes  to  show  why  Smith  expected  much  from  personal 
initiative.  His  optimism  was  grounded  in  this  amiable 
view  of  life  which  Naturalism,  as  already  pointed  out, 
had  everywhere  fostered.  Thus  he  exclaims :  "Without 
any  intervention  of  the  law,  therefore,  the  private  in- 
terests and  passions  of  men  naturally  lead  them  to  divide 
and  distribute  the  stock  of  every  society  among  all  the 
different  employments  carried  on  in  it,  as  nearly  as  pos- 
sible in  the  proportion  which  is  most  agreeable  to  the 
interests  of  the  whole  society."  The  main  passages  in 
his  "Wealth  of  Nations"  reflecting  this  attitude  are  too 
well  known  to  need  repetition  here.  But  it  deserves  men- 
tion that  mucli  the  same  idea  was  expressed  in  the 
"Theory  of  the  Moral  Sentiments,"  where  nothing  of  a 
scheme  of  political  economy  is  as  yet  intimated.  He  says 
for  instance :  "Take  the  whole  earth  at  an  average :  For 
one  man  who  suffers  pain  or  misery,  you  will  find  twenty 
in  prosperity  and  joy,  or  at  least  in  tolerable  circum- 
stances." ^  And  again :  "They  [the  opulent]  consume 
little  more  than  the  poor,  and  in  spite  of  their  natural 
selfishness  and  rapacity,  though  they  mean  only  their 
-own  conveniency,  though  the  sole  end  which  they  propose 
from  the  labors  of  all  the  thousands  whom  they  employ, 
be  the  gratification  of  their  own  vain  and  insatiable  desires, 
they  divide  with  the  poor  the  produce  of  all  their  improve- 
ments. They  are  led  by  an  invisible  hand  to  make  nearly 
the  same  distribution  of  the  necessaries  of  life,  which 
would  have  been  made,  had  the  earth  been  divided  into 
equal  portions  among  all  its  inhabitants ;  and  thus,  with- 
out intending  it,  without  knowing,  advance  the  interest  of 
the  society,  and  afford  means  to  the  multiplication  of  the 
species.     When  Providence  divided  the  earth  among  a  few 

•Part  III,  ch.  3. 


NATURALISM  77 

lordly  masters,  it  neither  forgot  nor  abandoned  those  who 
seemed  to  have  been  left  out  in  the  partition.  ...  In  ease  of 
body  and  peace  of  mind  all  the  different  ranks  of  life  are 
nearly  upon  a  level."  "^  Did  Roscher,  the  pioneer  of  the 
Historical  movement  a  century  later,  think  of  this  passage 
when  he  added:  "As,  in  the  structure  of  the  world,  the 
apparently  opposing  tendencies  of  the  centrifugal  and 
centripetal  forces  produce  the  harmony  of  the  spheres, 
so,  in  the  social  life  of  man,  self-interest  and  conscience 
produce  in  him  the  feeling  for  the  common  good"  ?  ^  Prob- 
ably not,  but  it  is  certain  that  many  have  echoed  these 
sentiments  of  a  noble  investigator  who,  in  spite  of  his 
knowledge  of  the  world,  could  not  believe  in  the  failings  of 
men.  Laws  of  nature,  rights  of  men,  and  the  rationality 
of  virtue  appeared  to  direct  people  so  that  good  prevailed 
over  evil. 

The  theological  background  in  fact  gave  the  setting  to 
most  of  Smith's  psychological  arguments.  He  thought 
of  man  as  being  made  in  the  image  of  God  more  than  as  a 
machine  that,  in  French  materialistic  fashion,  operated 
like  atoms  in  endless  space.  He  vents  his  feeling:  about 
the  matter  in  phrases  like:  "God,  the  avenger  of  injus- 
tice." ^  Reverence  for  natural  behavior  "is  still  further 
enhanced  by  an  opinion,  which  is  first  impressed  by  nature, 
and  afterwards  confirmed  by  reasoning  and  philosophy, 
that  the  important  rules  of  morality  are  the  commands 
and  laws  of  the  Deity  who  will  finally  reward  the  obedi- 
ent, and  punish  the  transgressors  of  their  duty.  .   .  ."  ^^ 

'Part  IV,  ch.   1. 

'  Principles  of  Political  Economy,  translated  by  Lalor,  J.  J.,  1878, 
vol.  1,  p.  75.  See  also  Smith's  Wealth  of  Nations,  Book  IV,  ch.  2  and 
ch.  7. 

» Theory  of  the  Moral  Sentiments,  Part  III,  ch.  5.  Edition  used  is 
the  last  published  during  Smith's  lifetime,  reprinted  by  Wells  &  Lilly, 
Boston,   1817. 

'» Ibidem.  A  strikingly  similar  A'iew  will  be  found  in  Vico's  (J.  B.) 
Principes  de  la  Philosophle  de  THistoire,  1725.  Book  I,  ch.  4.  See 
Michelet's    (J.)    translation   from  the  Italian,  1835. 


78       THE  DEVELOPMENT  OF  ECONOMICS 

God  meant  men  to  be  happy ;  "no  other  end  seems  worthy 
of  that  supreme  wisdom  and  divine  benignity  which  we 
necessarily  ascribe  to  Him."  ^^  We  are  benevolent  our- 
selves because  convinced  that  "all  the  inhabitants  of  the 
universe,  the  meanest  as  well  as  the  greatest,  are  under 
the  immediate  care  of  that  great  benevolent  and  all-wise 
Being  who  directs  all  the  movements  of  nature,  and  who 
is  determined,  by  his  own  unalterable  perfections,  to  main- 
tain in  it,  at  all  times,  the  greatest  possible  quantity  of 
happiness."  ^^  Hence  the  virtuous  will  be  content  that 
national  interests  "should  be  sacrificed  to  the  greater 
interest  of  the  universe — of  which  God  Himself  is  the 
immediate  administrator  and  director."  ^^  And  here  again 
we  find  assent  among  writers  of  a  different  temperament, 
as  in  W.  Whewell,  the  author  of  the  "History  of  Inductive 
Sciences,"  who  in  his  "Elements  of  Morality"  exclaims : 
"These  ideas  [of  benevolence,  justice,  etc.]  were  given  to 
man  by  God  in  order  tliat  he  might,  by  them,  direct  his 
actions."  ^^  Or  note  from  the  Archbishop  Whately  this 
belief :  "Man  is,  in  the  same  act,  doing  one  thing  by  choice 
for  his  own  benefit,  and  another  undesignedly  under  the 
guidance  of  Providence  for  the  service  of  the  commu- 
nity." ^^  Reason  thus  was  the  mirror  by  which  men 
should  adjust  their  dress  of  manners. 

All  this  then  reminds  us  that  Smith  not  only  listened 
to  the  prophets  of  his  day,  but  that,  on  a  test,  he  could 
answer  questions  independently.  For  he  frankly  admitted 
his  dissent  where  it  counted,  and  rejected  even  more  than 
he  assimilated.  He  was  an  eclectic  like  other  founders 
who  add  enough  in  treatment  and  viewpoint  to  dominate 
their  age,  and  yet  have  their  mind  attuned  to  the  voices 

"  Ibidem. 

"Ibidem,  Part  VI,  ch.  2. 

"  Ibidem. 

'♦  Whowell,  W..  vol.  1,  Book  III,  ch.  1. 

"Lectures  on  Political  Economy,  1831,  Lecture  IV, 


NATURALISM  79 

about  them.  In  his  "Theory  of  the  Moral  Sentiments" 
Smith  speaks  somewhat  scornfully,  if  not  despairingly,  of 
Stoics,  Hedonists,  and  Intuitionists,  He  does  not  fully 
agree  with  any  of  them,  nor  wishes  to  admit  more  than  a 
cursory  acquaintance  with  their  works.  That  he  had 
bestowed  some  thought  upon  their  preachments  we  may 
safely  assume;  but  it  hardly  seems  as  though  he  had 
done  them  full  justice.  Instead  he  starts  with  a  different 
idea,  and  develops  it  into  a  full-blown  theory  of  ethics. 

The  opening  sentence  of  his  "Theory  of  the  Moral 
Sentiments"  reads:  "How  selfish  soever  man  may  be  sup- 
posed, there  are  evidently  some  principles  in  his  nature 
which  interest  him  in  the  fortune  of  others,  and  render 
their  happiness  necessary  to  him  though  he  derives  noth- 
ing from  it  except  the  pleasure  of  seeing  it."  Thus  for- 
mulating the  problem  he  proceeds  to  solve  it,  the  general 
course  of  his  argument  being  sufficiently  familiar  to  all 
students  of  ethics.  He  leans  toward  intuitionism  in  that 
a  potential  power  for  moral  judgment  is  taken  for 
granted ;  but  he  becomes  an  empiricist  mainly  by  stressing 
the  force  of  experience  in  developing  this  potency.  He 
writes :  "Upon  whatever  we  suppose  that  our  moral  facul- 
ties are  founded,  whether  upon  a  certain  modification  of 
reason,  upon  an  original  instinct  called  a  moral  sense,  or 
upon  some  other  principle  of  our  nature,  it  cannot  be 
doubted  that  they  were  given  us  for  the  direction  of  our 
conduct  in  this  life."  ^^  Such  "rules  of  morality  are  the 
commands  and  laws  of  the  Deity."  ^"^ 

But  if  experience  did  not  teach  us,  the  faculty  for 
judging  would  nonetheless  remain  dormant.  A  being 
brought  up  in  complete  isolation,  we  are  told,  could  have 
no  sense  of  right  and  wrong.     So  that,  if  we  wish  to  trace 

the  moral  sentiment  to  its  roots  we  must  after  all  con- 

"  Theory  of  the  Moral  Sentiments,  Part  III,  ch.  5. 
"  Ibidem. 


80       THE  DEVELOPMENT  OF  ECONOMICS 

sider  man  as  an  integral  part  of  his  social  environment. 
We  may  ask:  "What  is  it  which  prompts  the  generous 
upon  all  occasions,  and  the  mean  upon  many,  to  sacrifice 
their  own  interests  to  the  greater  interests  of  others?" 
answering:  "It  is  reason,  principle,  conscience,  the  inhabi- 
tant of  the  breast,  the  man  within,  the  great  judge  and 
arbiter  of  our  conduct."  ^^  But  in  the  last  analysis  we 
come  to  another  factor.  Namely:  "It  is  by  the  imagina- 
tion only  that  we  can  form  any  conception  of  what  are 
his  [the  fellowman's]  sensations.  ...  It  is  the  impres- 
sions of  our  or&n  senses  only,  and  not  those  of  his,  which 
our  imaginations  copy."  ^^  Sympathy  thus  is  "fellow- 
feeling  with  any  passion  whatever" ;  and  "if  we  consider  all 
the  different  passions  of  Human  Nature  we  shall  find  that 
they  are  regarded  as  decent  or  indecent  just  in  propor- 
tion as  mankind  are  more  or  less  disposed  to  sympathize 
with  them."  ^"  Thus  experience  underlies  the  growth  of 
moral  sentiments.  Utility  is  one,  albeit  not  the  sole, 
source  of  ideas  on  good  and  evil.  We  thrive  on  approval, 
and  perish  in  ostracism.  The  social  is  the  only  outlet  for 
our  endeavors,  however  self-regarding  the  immediate  end. 
Men  cannot  sin  forever.  As  Cumberland  had  remarked 
much  earlier,  the  battle  between  two  opposing  penchants 
is  won  for  Good.  Thanks  to  our  habit  of  seeing  the  world 
through  our  own  senses,  working  with  simple  ideas,  and 
reconstructing  them  into  concepts  of  vast  complexity,  we 
cower  before  the  censure  of  conscience,  doing  right  in 
spite  of  sore  temptations.  Introspective  psychology  thus 
helped  Smith  to  find  a  logical  basis  for  individualism,  for 
Laissez  Faire. 

This  in  a  degree  applies  also,  and  finally,  to  Smith's 
views  on  method,  so  far  as  he  had  any  at  all. 

1'  Ibidem,  Part  III,  ch.  3. 
"Ibidem,  Part  III,  ch.  1. 
'"  Ibidem,  Part  I,  ch.  2.     See  also  ch.  1,  first  sentence. 


NATURALISM  81 

Logic  had  not  traveled  far  when  the  "Wealth  of  Na- 
tions" was  penned.  The  foundations  for  Mill's  "Logic" 
had  in  a  sense  already  been  laid,  but  there  was  nothing  very 
definite  for  Smith  to  work  with,  and  out  of  his  own  mind 
he  probably  was  not  able  to  frame  a  clear-cut  opinion. 
Logic  was  not  his  forte.     However,  something  can  be  said. 

Francis  Bacon  had  sounded  a  clarion  call  in  his 
"Instauratio"  and  "Novum  Organum"  in  which  the  in- 
adequacy of  medieval  logic  furaished  a  leading  theme. 
Induction,  and  complete  induction  at  that,  was  held  to  be 
the  only  safe  method  for  arriving  at  truth.  The  experi- 
mental method,  comprising  notably  observation  and  meas- 
urement, stood  out  as  the  great  contribution  of  the  Re- 
naissance to  modern  science.  Though  nothing  was  said 
about  its  application  to  social  studies  it  could  not  be 
long  before  somebody  would  make  the  attempt. 

And  this  honor  fell  first  to  Thomas  Hobbes,  the  spokes- 
man of  everything  precise  and  S3^stematic  in  the  realm  of 
human  investigations.  JNIoral  philosophy,  he  boldly  as- 
serted, must  be  considered  after  physics  because  it  deals 
with  the  motions  of  the  mind  wliich  "have  their  causes  in 
sense  and  imagination."  ^^  In  his  chapter  "On  Method" 
he  differentiates  clearly  betwcn  dc-  and  in-duction,  urging 
the  former  for  social  science  because  it  rested  entirely  on 
facts  of  human  nature.  Given  these  elements,  it  would 
not  be  difficult  to  explain  such  norms  as  the  ethical  and 
the  intellectual.  Nothing  was  made  clear  as  to  the  scope 
of  social  science  or  the  laws  it  might  possibly  establish, 
but  in  resting  his  case  on  psychology  as  the  key  to  social 
problems  Hobbes  handed  down  a  decision  of  no  mean 
import. 

In  Locke  the  theory  of  knowledge  absorbs  so  entirely 
our  attention  that  the  methodological  question  is  hardly 

"  Elements  of  Philosophy,  Part  I,  ch.  6. 


82      THE  DEVELOPMENT  OF  ECONOMICS 

given  a  thought.  There  Is  virtually  nothing  of  impor- 
tance except  It  had  been  suggested  by  Hobbes  himself ;  as 
for  Instance  the  treatment  of  cause  and  effect,  (where 
the  idea  of  a  correlation  of  variables  is  already  vaguely 
broached)  the  principle  of  association,  or  the  forceful 
discussion  of  probability  and  error.  When  at  the  end  of 
his  "Essay"  Locke  offers  a  three-fold  classification  of 
sciences  the  dearth  of  data  for  a  logic  of  social  science 
becomes  unmistakable.  We  find  one  place  assigned 
to  "natural  philosophy"  whose  end  is  "bare  specula- 
tive truth;  and  whatsoever  can  -'.fford  the  mind  of  man 
any  such,  falls  under  this  branch,  whether  it  be  God 
himself,  angels,  spirits,  bodies,  or  any  of  their  affec- 
tions, as  number  and  figure,  etc."  A  second  class 
deals  with  "the  skill  of  right  applying  our  own  powers 
and  actions  for  the  attainment  of  things  good  and  use- 
ful," and  "the  most  considerable  under  this  head  is 
ethics";"-  while  a  third  is  logic.  Like  Hume,  the  author 
of  the  "Essay"  also  believed  in  the  certainty  of  moral 
knowledge  since  it  is  derived  Immediately  from  reflection, 
but  of  course  this  flirting  with  intuitionism  was  not  con- 
ducive to  a  development  of  inductive  logic. 
-  In  Hume  as  well  as  in  Smith  induction  is  practiced 
more  than  preached.  Thus,  if  the  former  declared:  "We 
must  .  .  .  glean  up  our  experiments  in  this  science  [of  hu- 
man nature]  from  a  cautious  observation  of  human  life, 
and  take  them  as  they  appear  in  the  common  course  of  the 
world,  by  men's  behavior  in  company.  In  affairs,  and  in 
their  pleasures,"  ^^  he  shows  the  application  not  merely  in 
his  "Treatise,"  but  with  signal  success,  for  the  time  at 
which  he  wrote,  in  his  "History  of  England."  As  a 
psychologist  he  might  say.     ".   .   .  In  the  production  and 

^'^  Essay  Concerning  the  Human  Understanding. 
"  Treatise,   Introduetion. 


NATURALISM  83 

conduct  of  the  passions  there  is  a  certain  regular  mechan- 
ism, which  is  susceptible  of  as  accurate  a  disquisition  as 
the  laws  of  motion,  optics,  hy  Irostatics,  or  any  part  of 
natural  philosophy,"  ^^  but  as  a  moralist  he  was  contented 
with  much  less,  with  variations  incalculable,  and  with  an 
implicit  recognition  of  the  limits  of  social  science.  In- 
deed, he  never  departed  from  his  earliest  conclusion 
that  "all  kinds  of  reasoning  consists  in  nothing  but  a 
comparison,  and  a  discovery  of  those  relations,  either  con- 
stant or  inconstant,  which  two  or  more  objects  bear  to 
each  other.'*  ^^  The  inconstancy  of  things  impressed  him 
most.  He  was  therefore  not  pretentious  in  his  sociologi- 
cal faith.  He  doubtless  warned  Smith,  his  admiring 
friend,  not  to  expect  too  much  from  social  analysis. 

Anyhow,  Smith  seems  to  have  been  at  one  with  his 
countryman  on  the  nature  of  human  knowledge.  He  too 
was  a  phenomenalist  who  deemed  knowledge  hypothetical 
except  where  verification  by  the  senses  followed.  Unlike 
Thomas  Reid,  his  successor  at  Glasgow,  Smith  clung  to 
subjecticism.  Imagination,  he  says,  in  his  paper  on  "Prin- 
ciples Which  Lead  and  Direct  Philosophical  Inquiries, 
Illustrated  by  the  History  of  Astronomy,"  is  the  basis  of 
all  knowledge.  Without  it  science  can  do  nothing;  and 
this  is  true  not  simply  from  the  standpoint  of  the  artist 
who  contrasts  vision  with  a  plain  sense  of  sight,  but  like- 
wise from  that  of  the  philosopher  who  would  understand 
the  secret  of  all  method.  Beyond  this  admission.  Smith 
used  a  common  sense  principle  of  work.  He  took  the 
facts  as  they  appeared  to  him.  He  has  his  eyes  every- 
where and  is  a  keen,  yet  a  sympathetic  student  of  human 
nature.  He  interests  himself  in  many  questions  and  dis- 
dains not  to  learn  from  the  humblest  peasant.     He  relies 

'*  Ibidem,  in  Essay  on  Passion,  at  the  end. 
"  Ibidem,  Bool£  I,  Part  III,  §  2. 


84       THE  DEVELOPMENT  OF  ECONOMICS 

as  much  upon  personal  experience  as  upon  books  or 
abstractions  professionally  distilled.  He  amazes  us  in  his 
"Theory  of  the  Moral  Sentiments"  with  a  wealth  of  illus- 
trations taken  from  daily  life  and  put  to  excellent  use. 
His  charming  character  as  Christian  and  scientist  shines 
on  many  a  page.  To  vitalize  the  inert,  to  return  into  the 
concrete  the  abstractest  principle,  this  is  his  sincere 
endeavor  in  which  none  succeeded  more  nobly.  Later 
critics  have  disagreed  on  the  question  of  his  method,  some 
thinking  it  purely  inductive,  and  others  altogether  deduc- 
tive, as  for  instance  D.  Stewart,  John  Rae  ^^  and  the  late 
Wilhelm  Wundt.^''^  However,  there  is  little  profit  in  ban- 
dying words  about  it.  The  Issue  is  not  whether  Smith 
adopted  one  or  the  other  device,  but  whether  the  two  are 
logically  or  psychologically  distinct,  or  whether  Smith 
committed  himself  definitely  to  any  one  plan  of  proce- 
dure, or  whether,  waiving  this  detail,  he  could  lay  the 
foundations  for  a  science  of  economics  by  any  means. 
And  here  our  answer  cannot  be  uncertain,  unless  we  rate 
substance  higher  than  form. 

Formality  docs  not  seem  to  have  counted  much  with 
the  author  of  the  "Wealth  of  Nations."  He  nowhere  dis- 
plays any  strong  sense  of  logical  sequence.  In  his  ethical 
treatise  he  comes  perhaps  near  to  it ;  but  in  that  field  for 
which  posterity  knows  him  best  he  composed  Avith  mucli 
freedom.  Students  have  pointed  out  that  probably  the 
work  grew  under  his  hands  in  the  writing  of  it,  and  with- 
out his  being  fully  alive  to  the  consequences  Involved. 
The  main  divisions  suggest  a  lack  of  pretense  to  system- 
atization  ;  overlappings,  repetitions,  excursions,  and  con- 
tradictions abound.     One  need  only  to  compare  the  st3'le 

"Sociological  Tiieory  of  Capital,  edited  l)y  Mixtor,  Ch.  \V.,  1005, 
Appendix,  Article  .').  The  original  title  of  the  work,  which  appeared  in 
18.34,  was:  Statement  of  Some  Now  Principles  on  the  Subject  of  Political 
Kconomy. 

-'  Wundt,   W.     Logik,   2  edit,   vol.   2,   Part   II,   p.   503. 


NATURALISM  86 

of  the  "Theory  of  tlie  Moral  Sentiments"  with  that  of  the 
"Wealth  of  Nations,"  to  see  the  difference  between  a 
work  long  looked  forward  to,  carefully  developed  along 
one  line,  even  lingered  over  with  pride,  and  one  in  which 
practical  purposes  rule  above  dignity  or  completeness 
of  treatment. 

There  is  no  better  attempt  at  a  delimitation  of  the  sub- 
ject in  the  "Wealth  of  Nations"  than  in  James  Steuart's 
"Principles  of  Political  Economy,"  a  work  of  great  merit 
published  in  1767,  and  the  unity  of  which  is,  in  one  re- 
spect, more  real  than  in  its  successor.  For  out  of  five 
parts  in  the  "Wealth  of  Nations"  only  two  deal  with 
economics  as  a  science,  and  all  in  all  this  portion  consti- 
tutes only  about  one  third  of  the  whole  survey.  Smith, 
to  be  sure,  treats  Public  Finance  much  more  thoroughly 
than  Steuart  and  excels  in  the  analysis  of  price  and 
shares,  in  historical  mindedness,  and  in  liveliness  of  dic- 
tion. But  it  will  not  do  to  dismiss  therefore  Steuart's 
work  as  inconsequential,  as  a  mere  relic  of  a  mercan- 
tilistic  age,  which  had  no  idea  of  science.  Rather,  there 
was  logic  in  Steuart's  leaving  out  history  altogether,  in 
assembling,  as  Justi  had  done  for  the  Kameralists,  the 
knowledge  of  the  day  on  all  economic  subjects,  the 
Physiocratic  view  alone  excepted. 

Steuart's  Political  Economy. — Steuart  begins  with 
population  and  agriculture,  and  ends  with  credit  and 
taxation.  He  devotes  a  disproportionate  amount  of  space 
to  trade  and  industry,  but  of  course  is  moved  by  the 
interests  natural  to  his  group.  Unlike  Smith  he  thought 
of  economics  as  an  art  rather  than  a  science.  He  tells  us 
at  the  outset:  "The  principal  object  of  this  science  is  to 
secure  a  certain  fund  of  subsistence  for  all  the  inhabi- 
tants, .  .  .  and  to  employ  them  ...  in  such  a  manner 
as  naturally  to  create  reciprocal  relations   .   .   .  between 


86       THE  DEVELOPMENT  OF  ECONOMICS 

them,  so  as  to  make  their  several  interests  lead  them  to 
supply  one  another  with  their  reciprocal  wants.  .  .  . 
Political  economy  in  each  country  must  necessarily  be 
different."  In  other  words,  applications  must  be  stressed, 
and  in  the  second  place  organization  itself  will  vary  as 
human  will  determines  it.  This  is  not,  then,  making  a  set 
of  laws  and  exact  definitions  out  of  social  inquiry,  but  for 
all  that  certain  general  principles  underlie  our  activities. 
The  premises  are  given  by  the  known  facts  of  human  na- 
ture. Self-interest  and  expediency  prevail  in  the  long 
run,  though  duty  and  sex  passion  frequently  defy  the  dic- 
tates of  reason.  Ethical  norms,  in  any  case,  must  not  in- 
fluence the  would-be  economist.  It  is  not  for  him  to  con- 
trast the  Is  with  the  Ought,  but  to  separate  them  so  as  to 
ascertain  facts  regardless  of  their  moral  values. 

Smith's  Idea  of  Prosperity. — In  this  Steuart  antici- 
pated Smith,  or  rather  was  more  consistent  than  the 
latter.  For  Smith  disliked  utilitarianism  as  then  under- 
stood, and  mused  on  the  riddles  of  progress  more  than 
on  the  foibles  of  a  straying  individual.  To  him  personal 
liberties  seemed  useless  without  the  economic,  and  both 
became  duties  when  viewed  from  the  standpoint  of  our 
'relation  to  Providence.  Hence  his  silence  on  legal  rights 
as  a  basis  for  economic  analysis:  hence  the  assump- 
tion of  private  property  as  something  either  due  to  labor, 
or  brought  into  existence,  perhaps  by  force,  yet  also  with 
the  sanction  of  an  omniscient  Deity,  Smith  could  not  get 
himself  to  believe  anything  else  than  that  God  kept  vigil 
over  human  affairs. 

Dugald  Stewart  in  his  biographical  sketch  brings  out 
this  point.  But  it  is  made  sufficiently  clear  in  the  "Theory 
of  the  Moral  Sentiments"  and  in  the  economic  trea- 
tise where  Laissez  Faire  is  presented  as  the  only 
natural  ideal  of  government.      It  is  avowed  to  be  best 


NATURALISM  87 

because  of  the  fundamentals  of  human  nature,  because  of 
the  Design  directing  human  liistory,  because  of  difFerencea; 
in  aptitude  and  the  advantages  of  a  division  of  labor. 
We  are  assured,  as  already  seen,  that  self  and  society 
M'ork  naturally  toward  the  same  end.  Sympathy  and 
conscience  curb  one,  while  egotism  or  vainglory  impel  the 
other.  No  matter  what  the  motive,  the  average  result  is 
the  same:  Mankind  prospers  in  proportion  as  the  indi- 
vidual is  allowed  to  go  his  own  way.  At  one  point  we 
are  shown  why  protection  to  agriculture  undermines  in- 
dustry, thus  depriving  the  farmer  of  his  home  market ; 
at  another,  that  the  "encouragement  of  industry  is  bad'* 
because  "no  equal  quantity  of  productive  labor  employed 
in  manufactures  can  ever  occasion  so  great  a  reproduc- 
tion" -^  as  agriculture.  Close  as  well  as  distant  views  are 
taken  of  the  situation,  but  throughout  the  argument  is 
for  freedom.  "The  great  object  of  the  political  economy 
of  every  country  is  to  increase  the  riches  and  power  of 
that  country,"  '®  and  that  can  only  be  done  by  respecting 
the  natural  harmonies.  This  was  very  much  in  the  style 
of  Adam  Ferguson,  wlio  in  liis  "Essay  on  the  History  of 
Civil  Society"  (1767)  had  written:  "Men  are  tempted  to 
labor  and  to  practice  lucrative  arts  by  motives  of  in- 
terest. Secure  to  the  workman  the  fruits  of  his  labor, 
give  him  the  prospects  of  independence,  or  freedom,  and 
the  public  has  found  a  faithful  minister  in  the  acquisition 
of  wealth.  .  .  .  The  statesman  in  this,  as  in  the  case  of 
population  itself,  can  do  little  more  than  avoid  doing  mis- 
chief." ^^  What  more  did  Smith  fight  for?  How  else 
could  he  give  point  to  his  economic  dissertation?  It  was 
the  collectivistic  aim,  like  Ferguson's  or  the  Phj'siocratic, 
justified  by  an  appeal  to  the  best  in  human  nature.  Col- 
's Wealth  of  Nations,  Book  II,  ch.  5.  See  also  Book  IV,  ch.  9. 
=»  Book  II,  ch.  5.  See  also  Stewart,  D.,  Lectures  on  Political  Economy, 
In  his  Collected  Works,  edit,  of  1829,  vol.  9,  p.  3. 
2°  Edition  of  1819,  p.  259. 


88       THE  DEVELOPMENT  OF  ECONOMICS 

lectlvlsm  was  part  of  the  Naturalistic  outlook,  though  it 
was  forgotten  or  despised  by  the  Utilitarians. 

A  modem  economist  is  not  far  wrong  in  writing: 
"Smith  may  be  said  to  have  fused  all  individual  interests 
into  one  great  national  interest.  He  has  nothing  to  say 
about  enterpreneurs  and  laborers.  .  .  ."  ^^  That  is  ex- 
actly so.  Smith  saw  the  problem  from  a  social  stand- 
point. He  emphasizes  the  material  origins  of  all  kinds  of 
wealth.  He  has  in  mind  stuff  and  energy  in  discussing 
value  or  labor.  He  is  more  interested  in  the  national 
budget  than  in  competitive  accounting,  and  hence  falls 
into  many  confusions  when  analyzing  cost  and  price, 
capital  and  shares  of  the  producing  factors.  What 
could  be  expected  from  a  student  who  wanted  a  long-time 
vista  rather  than  a  cross-section  of  the  present?  Eco- 
nomics had  not  yet  been  elevated  to  the  rank  of  an  "ex- 
act" science ! 

Economic  Doctrines. — But  important  concepts  were 
made  clear,  serving  to  give  prestige  to  the  "Inquiry" 
almost  as  much  as  did  his  critique  of  mercantilism.  There 
is,  for  instance,  the  imputation  of  wealth  to  labor  instead 
of  to  nature,  as  the  Physiocrats  desired.  In  line  with  the 
-  ideas  of  Locke,  Tucker,  Hume,  and  Turgot  the  active 
agent  in  production  is  set  apart  from  all  natural  re- 
sources. Tlie  congenital  abilities  of  men  are  pointed 
out;  education  is  given  credit  for  multiplying  productive 
powers  and  directing  thought  and  energy  into  useful 
channels.  Invention  is  not  overlooked  in  the  process,  for 
the  eighteenth  century  particularly  had  profited  by  it,  in 
agriculture  to  begin  with,  and  by  1776  industry  also  to 
some  extent.  Epoch-making  mechanical  inventions  were 
soon  to  be  made.     It  was  as  if  tlie  "Inquiry"  had  reckoned 

»'  Pierson,  N.  G.,  Princlplos  of  Economics,  transl.  by  Wotzel,  A.  A., 
vol.  1,  p.  10. 


NATURALISM  89 

with  this  industrial  revolution  and  tried  to  generalize 
upon  the  experiences  which  it  offered  to  economics. 

By  prudent  use  of  tlic  stock  in  hand  labor  was  shown 
to  benefit  constantly,  no  matter  how  slow  the  adjust- 
ment. From  labor  came  capital  and  savings,  but  to  labor 
also  went  wages  above  subsistence.  Not  waste  by  para- 
sites, as  jNIandeville  had  sponsored  it,  but  thrift  among 
workers  would  enrich  the  nation,  giving  variety  to  our 
mode  of  living  and  providing  for  the  Exchequer  that 
revenue  without  which  all  nations  were  powerless  when  at 
war.  The  soil,  to  be  sure,  might  give  out  now  and  then, 
or  yield  fruits  onl}^  after  much  coaxing  in  response  to 
long  hours  of  toil ;  but  man  was  his  own  captain  and 
savior;  he  could  add  labor-saving  devices  to  offset  the 
penury  of  nature,  or  proportion  his  outlay  on  agricul- 
ture, industry,  and  trade  so  as  to  outstrip  other  countries 
in  the  race.  It  was  a  question  of  arranging  the  different 
productivities  of  different  fields  of  work  in  a  certain  or- 
der, of  giving  men  free  rein  in  their  quest  for  employ- 
ment, of  letting  supplies  flow  freely  where  demand  seemed 
to  be  most  pressing.  Nothing  was  gained  by  regulating 
men  where  nature  had  already  provided  the  best  spur  to 
maximum  productiveness.  Free-trade  therefore  was 
good,  and  paternalism  bad.  In  banking  perhaps  a  mini- 
mum amount  of  supervision  would  lielp,  but  in  general 
the  individual  was  to  judge  for  himself. 

This  seemed  reasonable  in  an  age  where  the  masses  were 
just  completing  their  emancipation  from  the  fetters  of 
feudalism.  What  manumission  had  meant  to  the  four- 
teenth century,  and  the  "liberties  of  the  subject"  to  Puri- 
tans, that  the  next  age  expected  from  a  universal  ballot, 
from  reforms  in  representation,  freedom  of  contract  and 
of  vocation.  It  was  necessary,  as  Smith  saw  it,  that  pro- 
duction and  exchange  be  as  unhampered  as  an  expression 


90       THE  DEVELOPMENT  OF  ECONOMICS 

of  political  opinion  was  at  electioneering.  The  chain  of 
progress,  he  would  have  said,  runs  from  division  of  labor 
to  rising  efficiency ;  from  there  to  surplus  and  savings, 
and  then  further  to  the  development  of  capital  and  a 
rising  percentage  of  producers  in  the  population.  Na- 
tional power  could  not  unfold  itself  any  other  way,  nor 
could  mere  affluence  of  certain  people  measure  progress. 
For  at  last  analysis  nothing  was  so  fine  a  test  for  national 
vigor  as  a  high  density  per  square  mile.  "The  most  deci- 
sive mark  of  the  prosperity  of  any  country  is  the  increase 
of  the  number  of  its  inhabitants"  ^^ — increase,  be  it  noted, 
not  density  alone,  for  when  the  latter  was  at  its  maximum 
a  nation  might  reach  a  stationary  condition.  Smith 
therefore  was  in  accord  with  earlier  writers  like  Colbert 
in  France,  Seckendorff,  Conring,  and  Justi  among  the 
Germans,  and  Harrington,  Temple,  Child,  Locke,  and 
Petty  in  his  own  country.  He  frequently  evinced  his  in- 
debtedness to  others,  though  giving  a  moral  tinge  to  his 
decisions  such  as  others  cared  little  about. 

In  fact,  this  moral  undercurrent  in  a  sense  was  the 
undoing  of  Smith,  for  it  packs  his  treatise  with  inconsis- 
tencies that  have  never  ceased  to  interest  critics.  Both 
as  pioneer  who  opened  a  new  field  and  hence  left  many 
vague  concepts,  and  as  theist  who  seeks  new  norms  Smith 
was  likely  to  puzzle  posterity. 

How  many  definitions,  for  instance,  of  capital  and 
cost !  How  variable  the  stress  of  different  aspects  of  one 
and  the  same  thing  at  different  times !  How  noticeable 
the  mixture  of  competitive  and  non-competitive  norms ! 
How  tantalizing  the  law  of  price,  whether  of  wage  or  of 
goods !  At  one  time  supply  and  demand  as  guide  to  all 
values ;  at  another  cost  in  effort,  or  again  pecuniary  out- 
lay.    "Natural  value"  alongside   of  alternative   costs  in 

"  Wealth  of  Nations,  Book  I,  ch.  8. 


NATURALISM  91 

labor;  utility  ranking  with  scarcity  as  a  key  to  value; 
wage  as  a  rate  or  as  a  share  assigned  to  labor  in  general 
during  a  year.  It  is  impossible  to  tell  how  much  market 
prices  are  allowed  to  deviate  from  the  "natural,"  or 
whether  prices  cover  incomes,  or  not. 

In  trying  to  cover  all  the  facts,  especially  the  variety 
of  exceptions  for  every  rule,  Smith  was  enticed  into  ad- 
missions that  made  a  strict  logic  of  methods  impossible. 
There  was  no  doubt  that  a  new  vision  had  been  given 
to  the  world  in  his  "Wealth  of  Nations,"  but  it  might 
have  been  predicted  also  that  a  science  of  what  is  could 
not  succeed,  until  the  last  remnants  of  a  doctrine  of 
Ought,  which  still  clung  to  Smith,  had  been  disowned  as 
something  incongruous  and  detrimental.  And  this  was 
a  step  taken  by  his  successors  who  understood  him  only 
to  a  certain  extent. 


CHAPTER  FOUR 
UTILITARIANISM 

I.     Premises 

Environmental  Changes  from  1776-1900. — Since  1776, 
when  Smith's  "Inquiry  into  the  Nature  and  Causes  of  tiie 
Wealth  of  Nations"  was  given  to  an  expectant  world,  our 
social  environment  has  changed  so  as  to  make  a  compari- 
son of  the  two  eras  difficult.  When  Smith  wrote  his  main 
work  agriculture  was  still  the  dominant  industry  of  Eng- 
land. The  soil  still  fed  tlic  entire  population  and  even 
left  a  slight  surplus  for  export.  The  population  was  less 
than  a  quarter  of  what  it  is  to-day.  The  vestiges  of  the 
manor  system  had  not  yet  disappeared  from  the  land- 
scape, nor  from  the  statute  books.  The  people  were,  with 
the  exception  of  a  few  localities,  scattered  thinly  over 
the  land.  Privilege  was  for  the  nobilit}",  and  the  House 
of  Lords  kept  on  disputing  supremacy  with  the  Lower 
House.  To  gauge  the  prosperity  of  the  country  one 
traveled  over  the  highways  and  b^'ways  in  a  coach,  esti- 
mating crops,  reporting  on  the  improvements  made  on 
glebe  or  the  commons.  The  journals  of  the  da}'^  and  the 
better  known  surveys  of  A.  Young  remind  one  of  this 
rural,  Merrie  Old  England.  It  was  not  unnatural  for 
Smith  to  have  thouglit  only  of  wage-earner,  landlord, 
and  enterpriser  as  long  as  economic  organization  was 
simple  and  tlie  status  of  eacli  class  definitely  determined. 

On  the  continent  too  wealth  consisted  chiefly  of  land. 

92 


UTILITARIANISM  93 

That  is,  there  too  agriculture  was,  barring  certain  re- 
stricted regions  of  manufacture,  the  mainstay  of  the 
people.  Manu-facture  was  not  yet  a  misnomer  for  the 
production  of  most  commodities,  for  mechanical  power 
was  unknown ;  the  hand  did  nearly  all  the  fashioning,  the 
implements  were  few  whether  one  worked  as  a  farmer  or 
as  an  artisan  or  miner.  Indeed,  the  conditions  for  a 
marked  change  were  more  nearly  ripe  in  the  British  Isles 
than  elsewhere,  as  the  trend  of  history  soon  made  clear. 
It  was  not  difficult  to  arrive  at  a  conclusion  as  to  the  cir- 
culation of  goods  or  the  price-making  factors  while  the 
village  was  still  largely  self-sufficient,  the  organization  of 
business  simple,  and  the  right  of  each  claimant  to  the  so- 
cial dividend  traditionally  defined.  If  government  inter- 
ference had  lost  vogue  it  was  largely  because  markets 
were  still  of  a  restricted  area,  because  local  self-sufficiency 
was  a  real  economic  factor,  and  because  the  interdepend- 
ence of  nations  was  grouped  about  non-essentials  mainly. 
Necessities  had  not  yet  become  a  notable  part  of  over- 
seas commerce. 

But  all  this  was  changed  during  the  next  hundred 
3'ears.  By  the  time  J.  S.  Mill  composed  his  "Principles 
of  Political  Economy'*  the  world  had  undergone  decided 
changes ;  new  characteristics  had  displaced  those  Adam 
Smith  knew  so  well. 

Just  a  few  years  before  the  publication  of  the  "Wealth 
of  Nations"  Australia  was  discovered.  Since  then  no 
great  mass  of  land  has  been  added  to  our  map — unless  we 
include  the  antarctic  regions — but  exploration  opened  up 
the  interior  of  the  continents  whose  coastal  lines  earlier 
adventurers  had  sketched  in  the  rough.  Enormous  riches 
came  to  view  in  the  course  of  this  surveying  and  applying 
of  modern  science.  All  our  expectations  were  exceeded 
by  the  developments  in  the  Americas  and  in  Africa.     The 


94      THE  DEVELOPMENT  OF  ECONOMICS 

yields  of  gold  and  silver  that  most  impressed  the  sixteenth 
century  ceased  to  figure  prominently  in  modern  accounts, 
in  spite  of  their  unprecedented  volume  and  weight.  Other 
natural  resources  came  to  mean  so  much  more  to  us: 
Timber  and  iron  and  coal,  the  catch  of  the  fishing  fleets, 
the  fertility  of  virgin  soils  extending  over  vast  drainage 
basins,  the  commercial  value  of  waterways,  hydraulic 
power,  and  the  appearance  of  rare  minerals  indispensable 
to  modern  industry  and  warfare.  As  a  general  result  of 
such  accessions  new  in  kind  and  quantity  nations  swung 
themselves  up  to  higher  material  levels  of  living.  What 
was  once  the  privilege  of  the  few  by  degrees  became  the 
property  of  the  many.  Luxuries  became  necessities,  and 
the  annual  wage  that  formerly  would  have  sustained  a 
large  family  now  sufficed  scarcely  for  a  single  laborer, 
however  crude  the  services  he  might  render. 

Correspondingly,  too,  density  of  population  was  meas- 
ured by  different  standards,  for  two  square-miles  now 
harbor  as  many  people  as  five  once.  In  England  where 
economics  first  became  a  subject  for  popular  study  the 
number  of  inhabitants,  not  counting  Ireland,  increased 
from  nine  to  thirty-five  millions.  In  France  the  increase 
amounted  at  least  to  fifty  per  cent,  in  Germany  to  about 
one  hundred  and  fifty  per  cent,  and  for  all  Europe  to 
nearly  one  hundred  per  cent.  The  United  States  of 
America  had  a  little  more  than  tlirce  million  inliabitants 
when  the  first  census  was  taken  (1790),  ten  times  that 
number  at  the  outbreak  of  the  Civil  War,  and  over  a 
hundred  million  in  1920.  Big  cities  have  sprung  up  in 
the  Old  and  in  the  New  World,  some  of  them  growing  from 
country  towns  to  tlie  dimensions  of  a  metropolis.  Enor- 
mous congestion  at  these  centers,  and  a  general  gain  of 
the  urban  element  have  contributed  to  the  feeling  that 
economic  and  legal  relations  must  be  nicely  defined  and 


UTILITARIANISM  96 

constantly    supervised    if    peace    among    individuals    or 
among  nations  is  to  be  preserved. 

However,  science  and  industry  did  much  to  counter- 
balance the  pressure  of  population.  Discoveries  and  in- 
ventions have  enabled  us  to  do  what  was  impossible  to  the 
contemporaries  of  Adam  Smith,  or  on  the  other  hand  to 
do  it  in  only  a  fraction  of  the  time,  improving  on  quality 
and  serviceability  besides.  What  seemed  like  a  unique 
Industrial  Revolution  at  the  end  of  the  eighteenth  century 
in  England  has  since  been  followed  by  changes  just 
as  momentous  and  spread  over  a  far  larger  area  in 
Europe  and  in  the  western  hemisphere.  The  substitution 
of  mechanical  for  human  or  animal  power  was  the  first 
step  toward  an  incalculable  development  of  natural  re- 
sources. Machino-facture  displaced  manu-facture;  the 
domestic  system  was  replaced  by  the  factory  system ;  per- 
sonal ties  between  employer  and  emplo3'ee  gave  way  to 
purely  legal  ties ;  division  of  labor  to  specialization  and 
integration  of  processes  multiplying  wonderfully  the  pro- 
ductivity of  men,  though  also  cramping  their  faculties  of 
mind.  Large-scale  production  seemed  to  demand  this 
sacrifice.  Capital  intervened  between  producers  so  as  to 
divide  them  into  groups  with  distinct,  often  irreconcilable, 
interests.  Saving  was  still  important,  but  ingenuity  and 
captaincy  vastly  more  so.  Investments  counted,  and  land 
no  longer  measured  wealth.  To  OAvn  a  surplus  was  every- 
thing, but  how  it  was  acquired  was  less  than  ever  a  ques- 
tion of  personal  diligence  or  mastery  of  a  craft.  The 
metamorphosis  that  was  so  evident  to  the  eye  called  also 
for  a  metamorphosis  of  minds,  or  at  least  for  a  shifting 
of  emphasis  from  the  mastery  of  subjects  to  a  mastery  of 
men !  He  who  knew  how  to  organize  material  and  men  in 
their    legal    relations    under    freedom    of    contract    did 


96      THE  DEVELOPMENT  OF  ECONOMICS 

better  than  he  who  grasped  merely  their  technical 
interdependence ! 

A  roundabout  process  of  production  was  shown  to 
bring  the  best  results.  Though  the  initial  expense  might 
be  enormous,  it  paid  in  the  end,  for  the  flow  of  goods  was 
so  regular,  the  yield  so  colossal  that  nations  grew  richer 
than  ever.  Indirect  methods  of  production,  ramified  tech- 
nical cooperation,  the  objectification  of  personal  assets 
and  endeavors  through  capitalism,  and  the  economic  in- 
terdependence of  peoples  the  world  over — such  became 
outstanding  features  of  modern  life.  The  socio-economic 
mechanism  had  become  incredibly  complex. 

Nothing  but  a  marvelous  development  of  the  means  of 
communication  and  of  transportation  could  meet  the  re- 
quirements of  this  most  recent  situation.  Nothing  short 
of  decided  changes  in  popular  ideals  and  professional 
knowledge  could  be  expected  in  return. 

Communication  by  degrees  served  relatively  less  for  the 
exchange  of  news  and  views,  and  more  as  an  indispensable 
link  in  the  chain  of  want,  effort,  and  gratification.  ]\Iar- 
ket  conditions  had  to  be  quickly  appraised  and  put  at 
the  disposal  of  parties  separated  by  many  hundreds  and 
even  thousands  of  miles.  Equalization  of  demands  in 
point  of  time  and  place  resulted  from  tliis  intcrcliange 
of  intelligence  and  served  to  economize  labor,  besides 
leveling  prices  and  profits.  For  rapid  transit  the  tele- 
graph proved  as  valuable  as  steam-power  itself ;  and  from 
the  standpoint  of  government  nothing  was  more  needed 
than  an  apparatus  by  which  outlying  districts  of  admin- 
istration could  be  swiftly  reached,  for  instruction  or 
inquiry,  as  the  case  might  be.  National  consciousness 
depended  on  uniformity  of  beliefs  and  customs,  and  ra- 
pidity of  communication  took  first  place  as  an  agency 
for  bringing  this  about. 

Hence   the   progress    in    communication   must   be    con- 


UTILITARIANISM  97 

sidered  one  of  tlie  essentials  to  an  understanding  of  nine- 
teenth century  economic  developments.  The  variety  of 
devices  invented  to  convey  and  preserve  thought  is  as 
remarkable  as  the  diversification  of  our  material  prod- 
ucts for  daily  consumption.  Sound  and  sign — or  in 
Greek  words,  phone  and  graph — gained  prestige  in  the 
economic  sense  no  less  than  in  the  wider  intellectual. 
Everywhere  symbols,  audible  and  visible:  Telephone  and 
telegraph,  radiograph  and  automatic  telephoning,  phono- 
graph and  dictograph,  rotar}^  press  and  multigraph, 
photography  and  kincmatograph,  linotype  and  type- 
writer machines — all  these  and  more  rendered  service, 
shortening  distances,  carrying  thought  with  lightning 
speed,  multiplying  our  records  and  preserving  them  as 
tone  or  letter. 

Transportation  not  unnaturally  kept  strides  with  this 
revolution  in  communication.  The  railroad  and  the 
steamship  at  the  very  beginning  of  the  nineteenth  cen- 
tury Avcre  discussed  as  feasible  instruments  of  traffic. 
Steam  displaced  muscular  energy,  and  rails  the  once  in- 
dispensable pike.  Yet  steam-roads  have  found  a  rival 
in  electric  traction,  while  automobile  and  aeroplane 
have  in  part  at  least  made  us  independent  of  iron  tracks. 
Sailing  ship  and  stage-coacli  still  have  their  uses,  but  the 
business  world  has  long  since  found  them  inadequate. 
What  is  wanted  is  high  speed,  regularity  and  frequency 
of  movements,  safety  and  utmost  comfort,  cheapness 
and  independence  of  weather  conditions.  Thus  only  can 
the  productive  machinery  be  kept  going;  thus  only 
can  the  whole  earth  serve  as  a  single  market  in  which 
nations  bid  against  one  another,  as  once  upon  a  time 
individuals  at  a  fair.  Perishables  can  thus  be  trans- 
ported over  vast  distances  and  seasonal  products  ibe 
supplied  the  whole  year  round.  Large  markets  and 
localization  of  industry  go  hand  in  hand.     To  produce 


98      THE  DEVELOPMENT  OF  ECONOMICS 

cheaply  the  scale  of  operations  must  be  large,  but  to 
maintain  huge  plants  year  in  year  out  sales  must  extend 
over  large  areas,  catering  to  thousands,  if  not  to  millions-, 
seeking  an  outlet  in  foreign  lands,  and  tending  to  equalize 
supplies  very  much  as  telegraph  and  long-distance  phone 
help  to  equalize  demands. 

Naturally  such  transformations  gave  a  new  aspect  to 
our  general  mode  of  living,  and  to  our  economic  organiza- 
tion. The  simplicity  pictured  by  the  founders  of  eco- 
nomics no  longer  obtains  in  these  days,  nor  is  it  likely  to 
return.  The  technological  changes  mentioned  involved  a 
realignment  of  producing  factors  and  of  distributive 
agents.  They  added  many  members  to  the  group  which 
during  the  eighteenth  century  was  held  to  supervise  the 
entire  process  of  production  and  exchange.  New  prin- 
ciples and  irregularities  have  necessarily  appeared  in  the 
economic  life  of  nations.  Economic  theory  was  not  only 
bound  to  take  cognizance  of  these  modifications,  but  it 
was  pressed  more  and  more  to  ask  whether  its  allowances 
were  quite  sufficient.  The  last  few  generations,  in  other 
words,  not  merely  witnessed  a  decided  change  in  the  view- 
points of  economic  students,  but  they  furthermore 
amassed  knowledge  that  the  science  of  economics  in  par- 
ticular did  not  fully  utilize.  The  breach  between  the 
one  and  the  other  widened  in  spite  of  the  adaptations 
noticeable  in  economic  literature,  and  if  no  other  reason 
could  be  assigned  it  would  be  doubtless  the  old  one  that 
movements  of  thought  usually  overlap,  proceeding  at 
divergent  angles  no  matter  how  much  their  leaders  try 
to  keep  in  touch  with  one  another. 

Ideas  on  many  subjects  changed  of  course  pari  passu 
with  the  change  of  external  conditions,  that  is  of  means 
of  production  and  modes  of  consumption. 


UTILITARIANISM  99 

For  example,  the  average  man's  knowledge  was  en- 
larged, and  a  leverage  provided  whereby  personal  claims 
to  wealth  and  rights  could  be  made  a  potent  political 
force.  Illiteracy  has  become  much  rarer,  and  a  tolerant 
if  not  enthusiastic  regard  for  learning  more  common. 
The  higher  institutions  of  learning  instruct  hundreds  of 
thousands  when  formerly  they  were  open  to  only  a  few 
select  of  the  upper  social  strata.  The  cost  of  education, 
like  things  to  eat  and  wear,  was  lessened  particularly 
during  the  second  half  of  the  last  century,  and  perhaps 
most  of  all  in  the  United  States  where  nature  gave 
with  such  a  lavish  hand.  The  democratic  ideal  has  been 
put  to  a  test  nowhere  more  than  in  the  educational  field. 
The  older  notion  that  human  capacities  are  comparatively 
fixed  and  unequally  distributed  has  given  way  to  the 
assumption  that  the  majority  can  be  taught  to  think,  and 
to  master  a  given  subject.  Thus  the  results  of  scientific 
research  were  increasingly  put  before  a  curious  public. 
Public  school  attendance  was  enforced  and  prolonged. 
Lower  strata  rose  to  affluence  and  power  through  oppor- 
tunities bestowed  freely,  with  the  help  of  carefully  trained 
teachers,  and  at  the  behest  of  governments  who  deemed 
no  investment  as  profitable  as  money  spent  for  class-rooms 
and  laboratories. 

The  general  result  was  a  dissemination  of  knowledge 
among  the  masses  who  formerly  eked  out  a  bare  existence 
in  ignorance  and  despair.  But  the  process  has  not  yet 
gone  so  far  as  to  develop  the  average  man's  powers 
of  reasoning  as  well  as  his  ability  to  assimilate  facts. 
A  little  knowledge  for  everybody  turned  out  to  be,  as  so 
often  has  been  lamented,  a  dangerous  thing,  since  doubt 
was  cultivated  more  than  faith.  And  doubt  could  easily  be 
resolved  into  suspicion  and  restlessness.  An  interminable 
procession  of  readings  and  lecturing  through  the  daily 


100    THE  DEVELOPMENT  OF  ECONOMICS 

press  and  the  omnipotent  popular  magazine,  through  par- 
tisan organs  and  soap-box  orators  promoted  criticism 
more  than  cooperation.  In  its  desirable  form  this  agi- 
tation for  more  power  came  to  mean  a  universal  man- 
hood (and  in  some  countries  womanhood)  suffrage,  the 
representative  principle  of  government  gaining  ground 
everywhere.  At  the  other  end  however  it  brought  acts  of 
violence,  consolidations  for  group-aggrandizement,  an  in- 
tensification of  class-consciousness,  and  hence  indirectly 
a  greater  need  for  centralized  control,  whether  to  curb 
capital  or  to  safeguard  the  interests  of  a  responsible 
minority.  The  functions  of  government  therefore  aston- 
ishingly expanded  since  the  birth  of  Laissez  Faire.  A 
natural  trend  toward  complexity  in  economic  affairs  was 
accentuated  by  the  desire  of  legislatures  to  adjudicate 
cases  that,  according  to  classic  economics,  belonged  alto- 
gether to  the  individual.  Natural  science  and  applied 
science  were  accorded  a  place  in  public  control  irrespec- 
tive of  what  social  science  had  advocated.  Only  of  recent 
years  could  economists  see  their  way  clear  to  an  accept- 
ance of  policies  which,  though  furnishing  materials  for 
social  science,  had  certainly  not  met  with  the  approval  of 
its  first  designers. 

Nineteenth  Century  Science  and  Philosophy. — It 
goes  almost  witliout  saying  that  changes  in  political 
opinion  were  accompanied  by  changes  on  other  points 
of  doctrine  whose  bearing  upon  the  development  of 
economics  is  real,  however  difficult  it  might  be  to  trace 
them  in  detail.  The  rapid  growth  of  scientific  informa- 
tion, e.  g.,  influenced  economics  both  by  way  of  applied 
science  and  through  the  mediation  of  philosophy  in 
the  narrower  sense.  Of  the  fundamental  sciences  only 
physics  and  chemistry  had  progressed  far  by  the  end  of 
the  eighteenth  century,  unless  mathematics  be  here  also 


UTILITARIANISM  101 

considered  as  a  science.  Biology  and  psychology  had 
lagged  beliind  from  the  outset ;  but  since  Adam  Smith  they 
have  changed  radically  in  contents,  aims,  and  metliods. 
Economics  itself  led  the  way  among  social  inquiries,  while 
the  continued  study  of  nature  added  innumerable  special 
sciences  to  our  catalogue,  most  of  them  eventually  modi- 
fying the  views  of  an  earlier  age.  With  new  and 
incomparably  improved  instruments  for  measuring  mag- 
nitudes, most  relations  between  things  had  to  be  inter- 
preted. Precision  and  reliability  gained  immensely,  but 
on  the  other  hand  men  felt  less  cocksure  of  a  number  of 
propositions,  and  slowly  the  old  questions  arose  again,  or 
were  treated  with  a  respect  that  eighteenth  century 
prophets  would  have  wondered  at.  Definitions  were  re- 
stated and  revised  again.  Boundary  lines  between  ap- 
parently strictly  distinct  fields  of  inquiry  were  shifted 
or  became  blurred.  One  science  took  over  the  work  of 
another,  and  overlappings  became  permissible  because 
none  would  undertake  to  act  as  arbiter.  Thus  new  con- 
clusions and  hypotheses,  new  units  of  measurement  and 
ever  larger  questions  continued  bobbing  up.  In  so  far  as 
possible,  theorems  were  applied  and  served  to  alter  the 
economic  environment.  Engineering,  agronomy,  medicine, 
manufactures  of  various  sorts,  and  our  network  of  com- 
munications are  the  most  obvious  instances  in  point. 
But  as  against  these  triumphs  there  still  remained  prob- 
lems and  speculations  along  traditional  lines,  whose  ef- 
fect the  economist  could  not  altogether  escape. 

Indeed,  it  should  not  be  forgotten  that  economics 
sprang  directly  from  philosophy,  and  only  mediately 
from  natural  science.  For  as  has  been  shown,  it  was 
from  a  wish  to  establish  a  logical  connection  between  ques- 
tions of  ultimate  value  and  the  social  processes  that  men 
studied  these  latter.     When  economics  was  young  and  a 

UmVERSriY  Of  califcri^ia 


102    THE  DEVELOPMENT  OF  ECONOMICS 

demarcation  of  its  bounds  correspondingly  hazardous,  the 
union  of  philosophy  and  social  science  was  natural.  One 
took  for  granted  that  the  best  preparation  for  the  latter 
was  a  good  acquaintance  with  the  former.  The  Kamer- 
alists  and  the  Physiocrats  were  philosophers  more  than 
exact  scientists.  Adam  Smith  established  a  good  prec- 
edent in  his  university  lectures  on  moral  philosophy. 
As  J.  S.  Mill  put  it  in  his  essay  on  Comte:  "A  per- 
fson  is  not  likely  to  be  a  good  economist,  who  is  noth- 
ing else."  It  was  true  certainly  in  the  earlier  period  of 
economic  thought,  and  even  later  we  find  substantiation 
in  the  works  of  such  leading  lights  as  J.  S.  Mill  himself, 
of  his  father  James  Mill,  of  J.  Bentham,  Archbishop 
Whately,  W.  S.  Jevons,  H.  Sidgwick,  and — in  America 
among  others — H.  C.  Carey  and  F.  Bowch. 

In  view  of  this  union  of  philosophy  and  economics 
in  each  of  the  men  mentioned,  and  of  course  also  in  certain 
others,  one  naturally  expects  philosophic  history  to  have 
affected  the  growth  of  economics.  Its  literature,  to  be 
sure,  leaves  one  very  much  in  doubt.  Cross-references  are 
few  and  far  between,  and  of  specific  cases  in  which  eco- 
nomic argument  was  due  altogether  to  philosophic  theories 
there  appear  to  be  none.  What  we  can  say  is  that  probably 
many  economists  remembered  their  university  training  in 
certain  philosophic  subjects,  kept  abreast  of  their  times 
and  permitted  such  contemporary  speculations  to  color 
their  arguments  or  to  suggest  an  approach.  And  then, 
of  course,  there  is  that  residuum  of  dependence  which  a 
perusal  of  many  economic  treatises  reveals,  and  whose 
import  is  so  candidly  professed  by  some  pioneers  of  Utili- 
tarian and  Marginal  economics. 

To  illustrate  the  connection  from  only  two  problems  in 
philosophy,  namely,  those  of  truth  and  virtue:  Economics 
was  strengthened  by  tlie  empirical  outlook  as  regards  the 


UTILITARIANISM  103 

first,  but  drawn  toward  what  may  here  be  called  the 
transcendental  view  in  its  treatment  of  ethics.  That  is 
to  say,  economics  was  itself  assuredly  a  by-product  of 
empiricism  and  of  the  emergence  of  natural  science  out 
of  the  Renaissance.  The  demand  for  an  examination  of 
evidences,  for  experimentation  and  exact  tests,  for  a  be- 
lief in  the  reality  of  the  world  about  us  and  in  man's 
ability  to  know  things  definitely — this  demand  called  into 
being  social  no  less  than  natural  science,  and  true  to  this 
precedent  economics  was  separated  from  theology  and 
moral  philosophy.  Besides,  need  one  repeat  that  Comte's 
sociology  and  J.  S.  Mill's  "Logic"  give  the  finest  proof  of 
the  philosophical  foundations  underlying  much  economic 
theorizing? 

However,  it  is  true  that  while  all  knowledge  was  held 
to  be  experiential,  the  metaphysical  question  of  reality 
and  of  mind  being  variously  answered,  on  other  matters 
economists  agreed  with  the  Absolutistic  philosophy,  with 
German  Transcendentalism  and  Idealism  generally.  Few 
economists,  if  one  may  judge  from  leading  works,  con- 
cerned themselves  in  any  way  with  the  question  of  reality 
and  truth,  with  the  relation  of  tilings  to  values,  and  of 
Self  to  the  Universe ;  but  they  did  separate  truth  and 
virtue  in  Kantian  style.  Thc}'^  set  religion  aside  as  some- 
thing alien  to  social  inquiries ;  and  they  discussed  method- 
ology as  if  induction  and  deduction  were  opposites  or  at 
any  rate  categorically  distinct,  nay,  usable  at  will  ac- 
cording to  aims  pursued. 

Furthermore, — and  this  last  but  not  least — the  Trans- 
cendental school  of  philosophy  since  Kant  is  mainly  at 
the  root  not  only  of  all  modem  historism,  but,  in  particu- 
lar, of  economic  historism.  In  the  eighteenth  century  lie 
the  germs  of  nineteenth  century  relativism.  In  Hegel's 
dialectic  Marx  and  the  Historical  School  of  economists 


104     THE  DEVELOPMENT  OF  ECONOMICS 

found  inspiration  for  labors  whose  one  goal  was  the 
dynamic  interpretation  of  life.  The  idealistic  undercur- 
rent in  Hegel  was  disparaged.  The  pragmatic  out- 
growths of  a  later  epoch  were  adjudged  seemingly  as  of 
no  consequence  for  a  theory  either  of  pricing  or  of  pros- 
perity. But  the  unifying  force  of  the  historical  concept 
made  itself  felt  in  virtually  all  economic  literature  since 
1800.  Ricardo  is  an  exception  that  might  be  used  to 
prove  the  rule. 

The  Hegelian  logic  left  its  impress,  vaguely  but  indel- 
ibly, upon  economics  because  it  found  support  in  scientific 
discoveries  and  was  a  natural  starting-point  for  a  criti- 
cism of  any  static  social  theory. 

The  nineteenth  century  was  the  age  of  Evolution,  and 
it  was  the  evolutionary  view  which  could  most  readily  be 
deduced  from  Hegel's  metaphysics.  All  things  to  be 
judged  as  to  time  and  place!  A  mighty  principle  every- 
where at  work !  An  age  in  which  nothing  was  made  clearer 
than  the  instability  of  things  and  thoughts !  An  age 
which  could  boast  of  a  Darwin,  Spencer,  and  Wallace,  of 
a  Huxley,  Haeckel,  and  Weismann,  of  a  Lyell  and  a 
Baer,  of  paleontologists  and  philologists,  of  philosophers 
of  history  and  of  genetic  psychologists,  of  a  Bergson  and 
Nietzsche,  of  "periodic  laws"  in  chemistry  and  of  plane- 
tesimal  theories  in  astronomy.  Everything  real  and  valu- 
able onh^  for  a  while !  All  things  becoming  and  ending ! 
Nothing  true  except  for  person,  place,  and  period  !  Prag- 
matism as  a  theory  of  knowledge,  or  as  a  key  to  Logic. 
Mind  as  behavior,  and  belief  as  proof.  All  achievements 
for  the  moment,  and  nothing  above  a  testing.  The  Bible 
thus  but  a  book,  and  only  a  book.  Religion  all  too 
human,  and  foredoomed  to  change  with  time.  In  short, 
nothing  left  but  a  reference  of  values  to  individual  wants  ! 

It  cannot  surprise  us  if  in  at  least  some  of  its  phases 


UTILITARIANISM  105 

this  philosophy  appealed  to  economists,  prompting  them 
to  a  revision  of  premises  and  principles,  even  though  in 
tlie  main  Absolutists  led  the  way.  In  fact,  empiricism  and 
transcendentalism,  pragmatism  and  historism  in  the 
larger  sense — all  four  manners  of  philosophizing  found 
a  place  in  economic  literature.  But  broadly  speaking, 
their  consideration  was  so  slight,  and  the  doctrine  so 
flexible,  that  economics  had  nothing  to  expect,  or  nothing 
to  fear,  from  any  of  them.  Specialization  itself  made  dif- 
ficult a  sympathetic  insight  into  metaphysical  problems, 
and  the  practical  needs  of  the  time  further  directed  the 
course  of  economic  investigations.  The  progress  of  eco- 
nomics, for  this  reason,  must  be  sought  in  steps  taken  in- 
dependent of  philosophic  movements.  Developments  after 
Smith  are  measurable  entirely  by  what  economists  as  such 
wrote  after  him. 

Economics  from  1776  to  1817. — WKen  Adam  Smith  died 
in  1790  his  work  had  already  made  him  famous.  He  had 
the  satisfaction  of  seeing  his  treatise  praised  by  a  large 
number  of  experts  both  in  his  native  land  and  elsewhere. 
Five  editions  of  the  "Wealth  of  Nations"  were  published 
during  his  lifetime.  Men  prominent  in  public  affairs  paid 
tribute  to  his  genius  and  labored  to  make  him  known  in 
high  official  circles.  Pitt  the  Younger  was  among  his 
admirers.  Parliament  complimented  him  and  hastened 
to  test  out  some  of  the  principles  enunciated.  The  stir 
that  Smith's  message  created  was  the  greater  since  no 
words  for  economics  anywhere  near  so  convincing  and 
thorough  were  spoken  for  several  decades  to  come. 
Smith  seemed  to  have  exhausted  the  subject  in  a  single 
discussion.  Monographs  on  a  variety  of  topics,  but  add- 
ing little  to  social  science  as  a  whole,  constitute  the  only 
contributions  during  the  Napoleonic  period.  Men  wrote 
on   rent,   on   the   essence   of   wealth,   and   on   population. 


106     THE  DEVELOPMENT  OF  ECONOMICS 

Malthus  in  1798  aroused  new  interest  by  his  "Essay  on 
Population."  The  Earl  of  Lauderdale  offered  a  stimu- 
lating and  by  no  means  one-sided  commentary  on  some  of 
the  blemishes  in  Smith's  great  work.  Bentham  and  God- 
win added  volumes  on  political  science,  morality,  and 
jurisprudence,  but  none  of  primary  significance  for  eco- 
nomics. No  departures  of  any  moment  were  attempted. 
The  materials  that  were  piling  up  for  a  revision  had  not 
yet  fallen  into  right  hands,  and  obscure  authors  labored 
unrewarded.  The  times  too  were  not  propitious,  since  the 
French  Revolution  had  begun  to  overshadow  everything 
else.  Thinking  people  watched  the  drama  at  Paris. 
The  progress  of  events  first  pleased,  then  baffled,  then 
disgusted,  and  finally  frightened  observers  into  apathy 
or  vehement  protest,  according  to  temperament  and 
responsibilities.  Normal  interests  were  forgotten  over 
the  incredible,  grotesque,  terrorizing  news  from  across 
the  Channel.  A  Burke  was  more  likely  to  be  heard 
than  a  Godwin,  though  both  had  an  audience  to  appeal 
to.  And  then  the  wars,  the  defensive  ones  of  the  Na- 
tional Convention,  the  retaliatory  of  the  Directory,  and 
the  aggrandizing  of  Napoleon  Bonaparte !  Twenty  years 
of  campaigning  in  which  the  resources  of  all  Europe  were 
pressed  into  service.  So  far  from  our  wondering  at  the 
paucity  of  economic  literature  during  this  epoch,  we 
should  rather  marvel  at  what  was  written.  For  after  all 
there  was  Germany  and  France  whose  appreciation  of 
Smith  had  many  echoes,  to  say  nothing  of  the  idealistic 
philosophy,  of  literary  romanticism,  and  the  communistic 
propaganda  of  French  reformers. 

In  Germany  the  first  translation  of  the  "Wealth  of 
Nations"  appeared  as  early  as  1778,  though  the  better 
ones  came  later,  of  which  many  editions  seemed  needed  to 
satisfy  a  widespread  demand.   If  one  may  believe  Roscher, 


UTILITARIANISM  107 

who  went  into  the  question,  the  reception  accorded  to 
Smith's  ideas  was  not  cordial  everywhere,  yet  there  came 
forth  scholars  from  all  sides  who  openly  espoused  the  new 
cause.  Hostile  reviews  were  the  exception.  Indifference 
prevailed  at  first  among  the  older  group  of  economists,  but 
this  too  gave  way  to  a  willing  examination  of  the  English 
masterpiece.  The  greatest  handicap  for  any  systematic 
treatise  was  not  the  German's  personal  bias,  but  his  im- 
mersion in  either  Kameralism  or  metaphysics.  Those 
specializing  in  economics  had  not  yet  learned  to  distin- 
guish between  science  and  art,  or  between  economics  in 
particular  and  moral  philosophy  in  general.  The  intellec- 
tual ancestry  of  German  economics  was  against  its  be- 
coming easily  a  science  of  universal  laws.  As  we  have  seen, 
the  practical  aim  everywhere  determined  the  lines  of 
investigation.  Theology  had  not  lost  its  hold  on  Kamer- 
alism. Theories  of  state  vitiated  economic  analysis.  The 
center  of  interest  was  not  the  individual,  but  the  com- 
munity or  the  dynasty.  But  on  the  other  hand  the  genius 
of  the  people  shone  most  brilliantly  in  speculations  on 
the  Infinite  and  Unknown,  Kant  opening  a  new  era  by 
his  metaphysics  and  ethics,  while  Fichte,  Schelling,  Hegel 
and  Schopenhauer  continued  the  search  for  an  Ultimate 
Reality.  Schleiermachcr  was  more  native  to  German 
soil  than  a  Utilitarian  could  ever  have  been.  The  per- 
spective of  a  Goethe  did  not  fit  in  well  with  the  exhorta- 
tions of  a  Fichte  that  his  countrymen  become  clear-sighted 
and  practical.  Herbart's  psychology  was  intelligible  be- 
cause it  formed  a  part  of  the  reaction  against  transcen- 
dentalism ;  but  empirical  studies  like  the  British  would 
nonetheless  have  had  a  hard  fight.  Characteristically  the 
German  philosophers  said  little  or  nothing  on  economics, 
Fichte's  half-socialistic  work  being  a  notable  exception, 
and  for  teachers   on   the   subject  nothing  counted  more 


108    THE  DEVELOPMENT  OF  ECONOMICS 

than  the  political  bearing  of  Manchestrianism.  To  them 
the  commercial  question  was  fundamental.  If  economics 
really  was  a  science,  then  it  should  have  advice  to  give 
to  princes  and  merchants. 

Put  differently,  Adam  Smith  was  appreciated  by  the 
German  economists  either  because  he  urged  free-trade,  or 
because  flaws  in  his  reasoning  played  into  the  hands  of 
the  protectionists.  The  national  movement  favored  this 
prejudicial  treatment  of  his  worlc.  Nothing  seemed  left 
after  the  final  collapse  of  the  "Holy  Roman  Empire"  ex- 
cept a  rebuilding  with  materials  that  would  speedily  unite 
all  parties  by  concerted  economic  action.  And  what  was 
more  calculated  to  rehabilitate  the  impoverished  land 
than  a  customs-union  embracing  the  whole  German  race? 
A  plea  for  Non-interference  therefore  not  only  offended 
believers  in  an  enlightened  autocrat,  but  besides  was  in- 
compatible with  a  strong  nationalistic  sentiment.  Only  in 
one  respect  had  British  economics  a  chance  among  Ger- 
mans, namely  in  that  the  whiff  of  democracy  and  personal 
liberty  animating  it  was  welcome  to  progressives  and 
broad-minded  statesmen  like  Hardenberg  and  Stein,  who 
saw  what  was  wrong  in  Prussia,  who  divined  the  causes 
of  the  German  defeat,  and  desired  a  break  with  the  past 
more  than  anything  else.  So  far  of  course  they  could 
see  good  in  the  French  Revolution,  and  still  more  in  a 
social  science  whose  first  premise  was  the  self-direction 
of  individuals  for  their  personal  good. 

The  critics,  for  this  reason,  could  not  carry  the  day 
without  adopting  in  large  part  the  principles  of  the 
Scotchman.  Though  exception  was  taken  to  details,  and 
doubt  was  expressed  as  to  the  universality  of  the  laws 
proclaimed  by  tlic  author,  his  general  viewpoint  won  in- 
stant applause.  Men  like  Kraus,  Sartorius,  Lueder, 
Luden,   Hufeland,   and  Lotz   undertook   to   acquaint   the 


UTILITARIANISM  109 

German  public  with  the  Laissez  Faire  doctrine.  Jakob, 
whose  strength  was  philosophy  even  more  than  political 
economy,  defined  the  latter,  not  quite  in  the  manner  of 
Smith,  as  the  "science  dealing  with  the  nature  and  causes 
of  national  wealth,  with  regard  for  the  influence  of  social 
institutions  and  positive  legislation."  ^  His  contempo- 
rarj^  Mueller,  injected  a  theological  tone  into  the  mat- 
ter, and  dwelt  more  on  policies  than  on  theory.  To  him 
"the  state  is  the  greatest  of  all  needs  of  man,  the  need 
both  of  his  heart,  his  mind,  and  his  body.  Man  without 
the  state  can  neither  hear  nor  see  nor  think,  feel,  nor 
love.  In  short,  man  apart  from  the  State  is  unthink- 
able." "  Sentiments  like  these  deserve  mentioning  be- 
cause it  is  easy  to  exaggerate  the  fidelity  with  which  the 
Germans  copied  Adam  Smith.  When  all  is  said  and 
done,  their  imitation  did  not  consist  in  a  granting  of  the 
premises  which  Smith  took  from  a  long  line  of  ethicists, 
psychologists,  political  philosophers,  using  them  discrimi- 
natingly in  developing  his  "Theory  of  the  Moral  Senti- 
ments," but  rather  in  an  agreement  to  his  main  conclu- 
sions, or  to  his  analysis  of  price  and  income.  His  account 
of  the  mercantilistic  program  is  noted  more  frequently 
than  his  logical  innovations  ! 

There  was  indeed  something  lacking  in  the  perfection 
of  the  work  so  long  as  its  external  structure  was  not  re- 
built by  a  more  skillful  designer.  And  so  one  might 
argue  that  a  considerable  measure  of  the  influence  ex- 
erted by  the  "Wealth  of  Nations"  is  due,  not  to  its  in- 
trinsic merits,  but  to  J.  B.  Say,  the  Frenchman,  who  for 
the  first  time  gave  economics  a  definite  form,  putting  his 
materials  under  precise  captions,  thus  inaugurating  a 
custom  that  has  never  been  abandoned  since. 

'  Quoted  by  Roscher,  W.  Geschichte  der  National  Okonomik,  in 
Deutschland,  1S74,  p.  688. 

'  Elemente  dor   Staatskunst.  1808,    Introduction. 


110    THE  DEVELOPMENT  OF  ECONOMICS 

As  in  Germany,  so  in  France  translations  of  Smith 
were  swiftly  undertaken,  the  first  dating  from  1781,  and 
others  from  the  next  decade.  There  was  enough  call 
to  justify  several  editions,  for  in  the  first  place  the 
Physiocrats  were  more  akin  to  Smith  than  the  Kameral- 
ists,  and  in  the  second  place  France  had  for  a  century 
found  inspiration  in  British  thought  and  policies.  Thus 
the  interest  of  Frenchmen,  which  between  1790  and  the 
establishment  of  the  Empire  in  1805  had  been  focussed 
upon  legislation  and  politics,  passed  easily  over  into  re- 
spect for  a  doctrine  which  purported  to  outline  funda- 
mentals of  government.  A  treatise  on  political  econ- 
omy, if  decked  out  in  suitable  dress,  could  hardly  fail  to 
impress  the  heirs  of  Physiocratism. 

Say  must  therefore  be  regarded  as  a  notable  factor  in 
the  dissemination  of  Smithian  ideas.  He  popularized  the 
new  economics  by  restating  it  in  precise  terms,  adding 
elegance  and  verve  to  the  flow  and  clarity  with  which 
Smith  himself  had  written.  But  what  is  more,  he  di- 
vides his  subject  into  three  main  parts,  all  of  which  to- 
gether constitute,  as  he  takes  pains  to  make  clear,  the 
science  of  economics.^  Production  is  first  treated,  just 
a^  in  the  "Wealth  of  Nations,"  but  to  the  exclusion  of 
a  price  analysis.  On  the  contrary,  exchange  is  incor- 
porated with  Book  One  because,  unlike  Smith,  Say  con- 
ceded a  productive  value  of  services  other  than  those  of 
manufacturer  or  farmer.  Exchange  hence  is  a  specie  of 
production,  and  probably  in  harmony  with  this  concept 
much  is  said  in  the  first  part  on  commerce  and  currency. 
Book  Two  then  discusses  distribution,  that  is  the  ap- 
portionment of  the  annual  income  among  the  producers, 
value  and  price  being  dealt  with  ahead  of  the  revenues 
of  land,  capital,  and  industry.  In  the  fourth  French 
« Translation  of  Prinscp,  C.  R.,  1S21,  edited  by  Biddle,  C.  C. 


UTILITARIANISM  111 

edition  we  are  told  at  the  beginning  of  the  chapter  on 
distributive  laws  that  "tlie  causes,  which  determine  the 
value  of  tilings,  and  which  operate  in  the  way  described 
in  the  preceding  chapters,  apply  without  exception  to 
all  things  possessed  of  value,  however  perishable; 
amongst  others  therefore  to  the  productive  service  yielded 
by  industry,  capital,  and  land,  in  a  state  of  productive 
activity." 

This  surely  is  something  worth  while — an  amplification 
of  Smith's  treatment  that  cannot  be  rated  too  highly. 
Price  hereafter  will  figure  as  a  bundle  of  income-shares. 
To  explain  price  is  to  explain  shares.  Distribution  and 
Price,  as  categories  in  economics,  are  complementary  like 
two  sides  of  a  piece  of  paper.  We  can  consider  them 
separately,  but  they  belong  together.  It  agreed  with 
this  scheme  that  Say  placed  utility  above  labor  in  the 
accounting  for  value,  and  made  expenses  contain  much 
more  than  what  Smith  had  at  times  permitted  himself 
to  insinuate.  Indeed,  Say  went  so  far  in  his  stress  of 
the  subjective  side  of  value  that  he  despaired  of  being 
able  to  measure  it  exactly,  mainly  because  "subject  to 
the  influence  of  the  faculties,  the  wants  and  the  desires 
of  mankind."  Ganilh,  a  few  years  later,  echoed  this  sen- 
timent of  his  countryman,  but  without  being  as  sure  of 
the  method  by  which  economics  was  to  succeed. 

To  Say  the  method  of  economics  was  as  settled  a  ques- 
tion as  the  external  structure.  If  in  Book  Three  he  con- 
sidered Consumpton,  including  Public  Finance,  this  was 
an  acknowledgment  of  the  human  basis  of  social  events, 
the  wants  and  rights  of  a  consuming  public  being  the 
terminal  as  well  as  the  point  of  departure  for  economics. 
Consumption,  he  saw,  could  not  be  ignored  in  an  exam- 
ination of  revenues.  The  interest  of  the  government  in 
consumption  was  as  natural  as  once  had  been  its  interest 


112    THE  DEVELOPMENT  OF  ECONOMICS 

in  trade  or  manufacture.  But  precisely  on  this  account 
it  followed  that  the  method  of  economics  had  much  in 
common  with  that  of  other  sciences ;  for  a  few  postulates 
pivoting  on  facts  of  human  nature  would  suffice  to  de- 
velop an  imposing  superstructure.  So  we  are  informed: 
"Political  economy,  in  the  same  manner  as  the  exact  sci- 
ences, is  composed  of  a  few  fundamental  principles,  and 
of  a  great  number  of  corollaries  or  conclusions  drawn 
from  those  principles."  *  Deduction  must  predominate, 
even  though  the  Inductive  kind  of  reasoning  is  preferable 
where  possible.  Say's  "Treatise  on  Political  Economy" 
bears  out  this  thought,  for  in  spite  of  much  illustrative 
material  the  argument  proceeds  from  premise  to  con- 
clusion, and  from  the  latter  used  again  as  a  premise,  to 
further  assertions  quite  in  the  style  of  David  RIcardo. 
Not  that  the  treatment  is  as  bare  or  rigid  on  the  sur- 
face, but  the  underlying  characteristic  is  the  same. 

Logic  was  a  strong  point  with  Say,  as  may  be  further 
seen  from  his  criticism  of  Smith's  definition  of  production. 
To  debar  personal  services  from  this  class  docs  not  seem 
right  to  Say  who  argues,  a  propos  of  a  physician's  work : 
This  industry,  "as  well  as  that  of  the  pu!)lic  functionary, 
the  advocate  or  the  judge,  which  are  all  of  them  of  the 
same  class,  satisfies  wants  of  so  essential  a  nature,  that 
without  those  professions  no  society  could  exist.  Are 
not  then  tlie  fruits  of  their  labor  real?  Tliey  are,  so 
far  as  to  he  purchased  at  the  price  of  other  and  material 
products  wlilch  Smith  allows  to  be  wealth  .  .  .  "  ^  [Ital- 
ics mine].  Any  service  from  this  standpoint  represents 
value,  from  whicli  follows  incidentally  that  tlie  value  of 
the  use  of  capital  must  be  distinguished  from  the  efforts 
of   the   enterpriser  who   uses    capital.     Thus    profit    and 

*  Ihidom,  p.   xxviii. 
"Ibidem,  p.  03. 


UTILITARIANISM  113 

interest  are  two  different  things.  The  entrepreneur  view 
overbalances  Smith's  collectivism,  and  emphasis  is  shifted 
from  production  to  distribution.  The  earlier  works  of 
Garnier  and  Sismondi  see  nothing  amiss  in  this  modifica- 
tion, but  as  is  well  known,  protest  grew  stronger  with 
years. 

Smith  and  Ricardo. — For  the  time  being  however  the 
field  belonged  to  individualism,  thanks  first  to  the 
antecedents  upon  which  Utilitarianism  could  draw,  and 
secondly  to  the  kind  of  men  who  continued  the  labors 
of  Smith.  It  was  not  an  accident  that  Ricardo's  "Prin- 
ciples of  Political  Economy  and  Taxation"  attained  such 
wonderful  vogue,  nor  that  from  the  beginning  he  ignored 
the  foundations  of  Smith.  Smith  the  Scotchman  who 
exchanged  Prcsbyterianism  for  Deism,  and  Ricardo  the 
Portuguese  converted  from  Judaism  to  Christianity  I 
Morality  for  the  one  basic  to  all  social  life,  and  for 
the  other  a  personal  item  that  had  nothing  to  do  with  the 
problems  of  science! 

To  put  the  two  men,  therefore,  and  the  groups  of 
thought  the}^  represent,  into  one  class  is  to  do  violence 
to  important  facts ;  for  even  though  they  have  much  in 
common,  on  more  than  one  vital  point  they  part  com- 
pany. Ricardo  frankly  admitted  this  estrangement.  He 
M'as  as  fearless  in  criticizing  as  he  was  generous  in  his 
thanks.  That  Smith  had  blazed  the  path  which  others 
must  start  with,  was  never  denied.  The  question  was 
merely  how  far  the  trail  might  lead,  and  where  a  turn 
should  be  made.  Ricardo  by  his  concise  and  trenchant 
comment  on  Smith  answered  these  questions.  He  caused 
economic  thought  to  move  away  from  the  original  direc- 
tion. He  made  it  virtually  impossible  for  us  to  speak  of 
a  "classical"  economics ;  for  either  we  mean  by  it  the 
Utilitarian  outlook,  or  we  confine  it  to  the  Naturalistic 


114.     THE  DEVELOPMENT  OF  ECONOMICS 

presentation  of  Smith  and  the  Physiocrats.  In  the  for- 
mer case  the  founders  are  non-classical ;  in  the  latter  case 
classicism  died  almost  at  birth,  as  a  study  at  close  range 
of  the  two  respective  systems  will  soon  convince  us. 

TABLE  ONE 

CHARACTERISTICS   OF   SMITIIIAX    AXD   RICAHDIAX    ECOXOMICS    COMPARED 

Smith  Blear  do 

Katuralism  Utilitarianism 

Theism  Agnosticism 

Social    Instincts    (Sympathy)  Hedonism  (Associationism) 

Collectivism  Individualism 

Progress  Happiness 

Historical  Viewpoint  Static  Viewpoint 

Stress    on    Production    and    Ex-  Stress  on  Price  and  Distribution 

change 
Division  of  Labor,  and  Rising  Re-  Sex    Instincts,    and    Falling    Re- 
turns turns 
Wages  pitted  against  Profits  Wages  pitted  against  Rent 
Rent  as  Monopoly,  in  Price  Rent  as  Differential,  not  in  Price 
Rising   (Super-)  Wages  Subsistence  Wages 
Foreign  Trade  according  to  Abso-  Foreign  Trade  according  to  Rela- 
lute  Cost  Differences  tive  Cost  Differences 


The  accompanying  Table  may  serve  to  enlighten  us 
on  the  subject.  Naturalism  in  the  hands  of  Smith,  it 
will  be  noticed,  started  with  theistic  beliefs — very  definite 
and  persuasive  ones — and  ended  with  an  optimistic  ver- 
sion of  the  wages-problem,  if  applications  to  foreign 
trade  may  for  the  moment  be  set  aside.  By  Smith  the 
innate  goodness  of  man  is  appealingly  brought  forth  and 
the  power  of  conscience  portrayed.  We  are  told  much 
of  sympathy  and  little  about  selfishness.  The  weal  of 
all  is  never  overlooked.  On  the  contrary  the  only  defi- 
nition for  economics  ever  offered  refers  to  its  art-aspects, 
to  its  principles  of  policy.  The  thing  finally  aimed  at 
is  social  progress,  in  so  far  as  economic  means  and  meth- 
ods may  subserve  that  end  independent  of  theological  or 
moral  criteria. 


UTILITARIANISM  115 

Production  and  exchange  therefore  are  treated  largely 
in  a  non-competitive  spirit.  The  lessons  of  history  are 
invoked  to  lighten  the  way  of  the  statesman.  He  is  to 
measure  materials  and  labor-power  rather  than  rights  or 
incomes  individually  computed.  Division  of  labor  figures 
as  a  link  in  the  chain  of  universal  progress.  National 
dividends  and  not  personal  shares ;  returns  as  consisting 
of  stuff,  and  not  of  titles  to  it ;  output  to  be  deemed  more 
important  than  the  laws  of  pricing! 

So  the  "Wealth  of  Nations"  implies  the  existence  of 
a  super-wage  that  none  can  take  from  labor;  or  if  a 
conflict  is  to  be  thought  of,  it  is  between  profit  and  wages 
rather  than  between  landlord  and  artisan.  Rent  of 
course  is  part  of  price,  and  if  goods  fail  to  enter  the 
foreign  markets  it  is  not  on  account  of  tribute  paid  to 
land,  but  because  of  absolutely  higher  costs  of  production, 
the  law  of  self-interest  operating  under  like  conditions 
everywhere. 

Ricardo,  as  we  know,  preached  a  less  reassuring 
doctrine.  To  him  life  was  earnest,  and  the  outlook 
gloomy  for  the  masses.  Instead  of  reliance  upon  the 
deity  he  professed  what  amounted  to  agnosticism.  In- 
stead of  individualism  mitigated  by  the  inherent  virtues 
of  self-interest  he  shared  the  views  of  Bentham  and  Mill, 
hedonism  being  psychologically  proven  and  ethically 
either  invalid,  or  perfect — the  latter  seeming  most 
reasonable.  The  egotistic  bent  of  man,  in  other  words, 
called  for  actions  which  were  right,  however  honest  the 
protestations  of  the  injured.  Collectivism  was  out  of 
place ;  one  must  keep  it  out  in  order  to  give  economics  a 
scientific  validity.  Take  the  world  as  it  is.  Study  it  at 
a  given  instant  of  time.  Let  that  snapshot  suffice  for 
purposes  of  research,  and  the  laws  you  obtain  or  the  ap- 
plications you  seek  will  be  worthy  of  anything  done  by 


116    THE  DEVELOPMENT  OF  ECONOMICS 

the  physicist.  Happiness  must  be  sensually  measured  if 
wants  and  wealth  are  to  become  definite  quantities. 
Pleasure  and  pain,  and  not  progress  of  which  historians 
might  sing!  Price  as  the  central  problem  of  the  econo- 
mist, and  income  as  a  share  imputed  to  parties  legally 
instrumental  in  creating  products.  "The  produce  of  the 
earth  ...  all  that  is  derived  from  its  surface  by  the 
united  application  of  labor,  machinery,  and  capital,  is 
divided  among  three  classes  of  the  community,  namely  the 
proprietor  of  the  land,  the  owner  of  the  stock  or  capital 
necessary  for  its  cultivation,  and  the  laborers  by  whose 
industry  it  is  cultivated."  ^  A  remarkable  statement  in- 
deed! A  notification  that  must  have  astonished  the 
reader,  had  he  not  by  other  channels  been  kept  constantly 
in  touch  with  the  moods  of  the  day.  "To  determine  the 
laws  which  regulate  this  distribution  is  the  principal  prob- 
lem in  political  economy"  ^ — anotlier  departure  from  the 
accustomed,  and  one  destined  to  outlive  Utilitarianism 
itself. 

Sex  instincts  and  diminishing  returns,  rents  that  did 
not  enter  into  price,  wages  kept  low  through  the  laborer's 
own  folly,  and  yet  a  far-reaching  admission  (in  the  dis- 
cussion of  foreign  trade)  as  to  tlie  limits  of  mobility  for 
labor  and  capital — these  comprise  some  of  the  salient 
features  in  the  Ricardian  scheme  that  the  eighteenth 
century  had  led  up  to  as  truly  as  it  had  molded  tlie  creed 
of  Smith.  It  was  plain  that  Laissez  Faire  after  Ricardo 
would  mean  more  than  tlie  Physiocrats  had  intended,  and 
that  for  all  the  adherence  to  a  Smithian  terminology  or 
its  outward  form  the  contents  of  economics  had  to  cliangc. 
The  fact  that  Ricardo  was  a  banker  by  profession  fa- 
vored this  presumption,  but  the  new  economic  organiza- 

»  Ricardo,   D.,   Principlns  of  Political   Economy,   Preface. 
'  Ibidem. 


UTILITARIANISM  117 

tion  developing  in  England,  the  advent  of  machinofac- 
ture  and  world  commerce,  as  well  as  the  force  of  certain 
personalities  back  of  economic  investigations,  furnish  the 
final  reason.  Utilitarianism  had  too  many  friends  to 
fail  of  economic  expression! 

Utilitarian  Economics  Defined. — What  then  were  the 
main  characteristics  of  Utilitarian  economics?  The  an- 
swer is :  A  hedonistic  psycliology,  a  derivation  of  group 
incomes  from  laws  of  human  nature,  the  measurement 
of  prices  by  objective  costs  or  returns,  and  the  assump- 
tion of  certain  human  instincts  as  the  basis  for  individ- 
ual freedom  in  production  and  exchange.  Such  were  the 
ideas  principally  exploited  by  the  successors  to  Adam 
Smith,  and  it  must  be  borne  in  mind  tliat  Utilitarian 
tenets  figure  prominently  in  treatises  written  even  during 
the  last  few  decades,  even  though  on  the  other  hand  the 
Marginal  viewpoint,  which  has  dominated  most  economic 
writing  since  1890,  took  root  when  Utilitarianism  was 
still  at  its  height.  The  two  ways  of  looking  at  economic 
life  and  of  analyzing  price  and  income  overlap,  but  they 
also  share  in  common  a  few  fundamentals  that  the  Utili- 
tarian economists  first  gave  currency  between  1820  and 
1850. 

The  legal  premises  of  course  were  taken  over  directly 
from  Adam  Smith  and  the  writings  that  stimulated  his 
thought.  What  the  author  of  the  "Wealth  of  Nations" 
had  taken  pains  to  demonstrate  step  by  step,  starting 
out  from  facts  of  human  nature,  and  winding  up  with 
applications  to  questions  of  commercial  policy,  all  these 
theorems  of  Non-Interfcrcnce  the  Utilitarians  adopted 
without  further  ado.  They  made  an  axiom,  as  they  would 
doubtless  have  admitted,  out  of  the  arguments  of  their 
predecessor.  But  they  also  made  contributions  of  their 
own,    incorporating   into    their    economics    a    psychology 


118    THE  DEVELOPMENT  OF  ECONOMICS 

and  logic  that  Smith  had  treated  with  indifference.  One 
may  distinguish  therefore  the  one  from  the  other  by  re- 
membering that  Smith  was  steeped  in  theology,  in  ideal- 
istic ethics  and  a  theory  of  human  progress,  while  after 
his  time  description  superseded  purpose,  and  a  concern 
for  profits  the  notion  of  social  welfare. 

The  objective  viewpoint  governs  the  analysis  of  price 
and  of  shares  going  to  producer-groups,  in  which  re- 
spect Utilitarianism  differs  notably  from  Marginal  eco- 
nomics; but  the  subjective  approach  is  presaged  by  the 
persistent  reliance  upon  states  of  consciousness  and  of  the 
emotions  as  a  key  to  personal  valuations.  Motives  become 
very  important.  Pleasure  and  pain  become  words  all  too 
familiar  in  the  vocabulary  of  the  Ricardians.  Rising  and 
falling  degrees  of  want  for  present  goods  are  coupled 
with  more  or  less  vivid  recollections  of  former  experi- 
ences. Differentials  of  a  psychic  sort  mingle  with  those 
esteemed  most  highly  in  the  determination  of  values. 
Utilitarianism  everywhere  fortifies  its  positions  by  au- 
thorities in  non-economic  fields,  and  what  is  more,  the 
British  stamp  is  never  lost,  no  matter  whose  work  we 
have  before  us,  be  he  Frenchman  or  Teuton.  An  ac- 
-quaintance  with  English  and  Scotch  philosophical  and 
psychological  thought  is  valuable  precisely  because  of 
this  supremacy  of  the  Utilitarian  principle  in  orthodox 
economics  between,  say,  1800  and  1870.  The  dissenters, 
as  will  soon  appear,  are  not  a  few  in  number,  nor  can 
the  merits  of  the  historical  movement  which  steps  between 
Utilitarianism  and  Marginism  be  easily  overrated.  Yet 
there  remains  the  paramountcy  of  the  so-called  "classical 
economics"  and  the  conspicuous  role  played  by  later  neo- 
classicists  up  to  our  own  day. 

Utilitarian  Psychology. — The  ideas  which  Utilitarian 
economics  wove  into  its  story  were  substantially  the  same 


UTILITARIANISM  119 

that  Locke  had  first  submitted  to  metaphysicians,  and 
that  Hartley  and  Hume  had  further  developed  for  pur- 
poses not  by  any  means  economic.  By  1750  this  sensa- 
tionalistic  psychology  was  already  full-blown,  but  it  de- 
volved specially  upon  James  Mill,  the  father  of  John 
Stuart  Mill,  and  upon  such  wellknown  thinkers  as  Alex- 
ander Bain  and  William  Whewell  to  perpetuate  its  lead- 
ing doctrines  and  to  provide  the  data  for  J.  S.  Mill, 
the  logician  and  economist,  in  his  attempt  at  a  systematic 
exposition  of  social  science.  Thus,  through  the  agency 
of  a  comparatively  few  men  Utilitarian  economics  ac- 
quired its  premises ;  thus  the  "economic  man'*  could  be- 
come a  subject  for  studies  that  have  preoccupied  many 
an  industrious  scholar. 

So  far  as  the  argument  for  the  "economic  man"  is  con- 
cerned it  ran  somewhat  like  this.  All  ideas  are  derived 
from  sensations  or  from  other  simpler  ideas  themselves 
due  originally  to  stimuli  from  without.  Ideas  are  built 
into  complex  groups  of  notions  and  trains  of  thought. 
Furthermore,  these  latter  are  due  to  certain  principles 
of  association  which  also  account  for  our  belief  in  the 
regular  recurrence  of  events  outside.  Feelings  accom- 
pany ideas,  and  are  transformed  into  emotions  aroused 
either  centrall}',  or  directly  by  objects  about  us.  Reflec- 
tion is  a  powerful  aid  in  the  development  of  ideas  and 
ideals.  On  reflection  the  principle  of  association  begins 
to  operate,  and  this  applies  to  the  feelings  no  less  than 
to  ideas. 

Among  the  most  important  ideas  are  those  of  pleasure 
and  pain,  notions  which  must  necessarily  accompany  the 
great  majorit}^  of  sensations,  and  from  which  an  infinite 
variety  of  judgments  have  sprung  that  are  raw  material 
for  the  would-be  moralist.  Pain  and  pleasure,  however, 
though  not  all  due  directly  to  sensations,  remain  always 


120    THE  DEVELOPMENT  OF  ECONOMICS 

quantitative  items,  that  is,  they  vary  in  assignable  re- 
spects, but  because  of  the  materialistic  basis  of  sensa- 
tion cannot  contain  more  than  degrees  of  intensity,  dura- 
tion, uniformity,  etc.,  etc.  The  greater  this  quantity  the 
more  powerful  the  reaction  of  which  we  become  conscious, 
namely,  a  desire  or  aversion  to  do.  Endeavor  is  the  in- 
evitable concomitant  of  pleasure  remembered  or  admin- 
istered, and  this  is  known  to  us  as  a  wish  or  unwilling- 
ness. Pleasure  and  pain,  then,  measure  desire  or  aver- 
sion, and  vice  versa,  the  intensity  of  desire  being  an  index 
of  the  amount  of  pleasure  felt  or  anticipated  as  the  case 
may  be.  Now,  since  pain  and  pleasure  blend  in  almost 
all  our  reactions,  and  since  on  the  other  hand,  ideas  are 
governed  by  principles  of  association  which  group  them 
according  to  experiences  in  our  physical  or  social  en- 
vironment, it  follows  that  first,  economic  motives  have  no 
superior,  and  secondly,  laws  of  consciousness  may  be  es- 
tablished, some  governing  the  field  of  economics,  and  oth- 
ers ruling  in  other  fields. 

Further,  as  to  the  role  of  ethics  in  economics,  suppos- 
ing this  question  were  to  be  considered  at  all,  we  have 
no  choice  but  must  identify  the  good  without  exception 
with  the  possession  of  pleasure  or  the  freedom  from  pain. 
Utility  is  something  pleasurable,  and  both  are  equivalent 
to  virtue  or  happiness.  The  quantity  of  pleasure  and 
good  will  vary,  but  qualitative  distinctions  are  absurd,  for 
pleasures  are  nothing  but  quantities  physiologically  trace- 
able if  our  instruments  are  delicate  enough.  Two  impor- 
tant facts  must,  however,  be  kept  in  mind  with  regard 
to  this  sensational  basis  of  the  good;  namely,  in  the 
first  place,  the  laws  of  association  prompt  us  frequently 
to  value  things  which  at  first  were  only  means  to  the 
desired  end,  the  shifting  adding  greatly  to  our  range  of 
desires,  and  in  the  second  place  it  is  results  that  count. 


UTILITARIANISM  121 

and  not  motives.  Hence,  if  we  were  to  take  a  social  view 
of  the  problem,  we  might  easily  show  why  maximum  hap- 
piness of  the  greatest  possible  number  is  the  best  test 
for  morality.  In  this  sense  consequently  economic  and 
ethical  facts  deal  with  the  same  subject,  but  of  course 
there  was  no  reason  for  bringing  in  the  question  of  a 
goal,  since  in  a  perfectly  natural  manner  men  did  what 
tended  toward  the  highest  good. 

Curiously  enough  the  Utilitarian  economists  did  not 
develop  the  subjective  aspects  of  pricing,  nor  as  a  rule 
preach  hedonistic  ethics.  Instead  they  dealt  with  costs 
and  demand  as  objective  facts,  while  on  the  other  hand 
doubting,  or  renouncing,  the  moral  implications  of  their 
psychology.  Even  Hume  compromised  when  it  came  to 
a  decision  on  this  important  matter.  He  declared  frankly 
that  "the  chief  springs  or  actuating  principles  of  the 
human  mind  are  pleasure  and  pain;  and  when  these 
sensations  are  removed,  both  from  our  thought  and  feel- 
ing, we  are  in  a  great  measure  incapable  of  passion  or 
action,  of  desire  or  volition";  ^  but  nevertheless  he  identi- 
fied the  good  mainly  with  benevolence  and  sympathy. 
Virtue  to  him  had  a  social  aspect  far  removed  from  the 
craving  for  pleasure. 

However,  it  is  in  Hartley,  and  not  in  Locke  or  Hume, 
that  hedonism  is  given  its  final  and  most  convincing  form, 
the  hint  being  taken  from  John  Gray's  essay  of  1731 ;  and 
from  now  on  we  find  the  theory  prospering  with  which 
Bentham  is  commonly  associated,  though  as  a  matter 
of  fact  he  added  very  little  of  his  own.  Tucker  and 
Paley  had  anticipated  Bentham  in  the  clear  formulation 
of  a  universalistic  hedonism.  James  Mill  was  chiefly  re- 
sponsible for  the  vogue  it  obtained  in  economics.  Ben- 
tham himself  made  it  a  slogan  for  reform  in  politics  and 

•Treatise,  Book  III,  Part  III,  §  1. 


122    THE  DEVELOPMENT  OF  ECONOMICS 

criminal  law,  but  originality  can  hardly  be  credited  to 
him.  What  he  contributed  was  an  elaboration  rather 
than  an  initial  suggestion,  as  a  study  of  the  litera- 
ture will  show.  Hartley  in  1748  had  this  to  say: 
"Our  passions  or  affections  can  be  no  more  than  aggre- 
gates of  simple  ideas  united  by  association.  They  must 
be  aggregates  of  ideas,  or  traces  of  the  sensible  pleas- 
ures and  pains  which  ideas  make  up  by  their  number  and 
mutual  influence  upon  one  another."  ^  .  .  .  "Since  the 
things  which  we  pursue  do,  when  obtained,  generally  af- 
ford pleasure,  and  those  which  we  fly  from  aff'ect  us  with 
pain  if  they  overtake  us,  it  follows  that  the  gratification 
of  the  will  is  generally  attended  with,  or  associated  with, 
pleasure,  the  disappointment  of  it  with  pain.  Hence  a 
mere  associated  pleasure  is  transferred  upon  the  grati- 
fication of  the  will,  a  mere  associated  pain  upon  the  dis- 
appointment." ^^  Further,  "the  associated  circum- 
stances of  the  pleasures  are  many  more  than  the  pleas- 
ures themselves.  But  these  circumstances,  after  a  suf- 
ficient association,  will  be  able  to  excite  the  motions  sub- 
servient to  the  pleasures,  as  well  as  these  themselves ;  and 
this  will  greatly  augment  the  methods  of  obtaining  pleas- 
ure." ^^  Finally,  "all  the  pleasures  and  pains  of  sensa- 
tion, imagination,  ambition,  self-interest,  sympathy,  and 
theopathy  [love  of  God],  as  far  as  they  are  consistent 
with  one  another  and  .  .  .  with  the  course  of  the  world, 
beget  in  us  a  moral  sense,  and  lead  us  to  the  love  and  ap- 
probation of  virtue,  and  to  the  fear,  hatred,  and  abhor- 
rence of  vice.  .  .  ."  ^"  Thus  experience  entails  "the  de- 
duction of  all  our  moral  judgments,  approbations,  and 
disapprobations  from  association  alone."  ^^ 

•  Observations  on  Man  ,  1748,  vol.  1,  p.  368. 

">  Ibidem,  pp.  368-70. 
"  Ibidem,  p.  112. 
''  Ibidem,   p.   497. 
"  Ibidem,  p.  499. 


UTILITARIANISM  123 

In  this  way  hedonism  became  scientific,  somewhat  on 
the  principle  that  Karl  Marx  sought  to  give  a  scientific 
tone  to  his  demand  for  social  reform.  The  association 
law  was  used  to  explain  the  rise  of  a  desire  for  pleasure 
even  when  the  thing  aimed  at  did  not  itself  gratify  the 
senses.^*  The  happiness  of  men  was  held  to  flow  from 
their  acting  on  remembrances  no  less  than  on  stimuli  at 
work.  Tucker  elaborated  this  idea  in  1768  in  his  "Light 
of  Nature  Pursued."  Qualitative  differences  between 
pleasures  were  expressly  denied. ^^  The  stress  was  on 
gratification  for  its  own  sake,  saving  only  the  abstract 
view  of  happiness  for  the  greatest  number.  The  Baron 
d'Holbach  had  in  1771  in  his  "System  of  Nature"  given 
a  finished  form  to  this  sort  of  hedonism  with  the  aid  of  a 
materialistic  metaphysics.  Like  Helvetius  and  Cabanis 
he  had  eulogized  the  perfection  of  the  human  mechanism 
which  found  its  end,  its  pleasures,  in  the  natural  unfold- 
ing of  its  capacities.  "The  object  of  all  his  [man's] 
institutions,"  he  wrote,  "of  all  his  reflections,  of  all  his 
knowledge  is  only  to  procure  that  happiness  toward  which 
he  is  incessantly  impelled  by  the  peculiarity  of  his  na- 
ture." ^^  Man  being  a  purely  physical  structure  all  con- 
sciousness is  motion,  and  sensation  the  root  of  ideas. 
Truth  could  not  emanate  from  anything  else  but  a  cor- 
rect association  of  ideas  ...  as  shown  by  Locke  and 
Hume  whom  d'Holbach  followed  closely.  .  .  .  Happiness, 
therefore,  is  "the  coordination  of  man  with  the  causes 
that  give  him  impulse";  ^"^  and  "legislation  is  the  art  of 
restraining  dangerous  passions,  and  of  exciting  those 
which  may  be  conducive  to  the  public  welfare."  ^^ 

Considering    that    this    passage    antedates    Bentham's 

"  See  for  instance  Tucker,  A.     The  Light  of  Nature  Pursued,  1768. 

"  Ibidem,  Part  I.  ch.  IG,  §   1. 

"Vol.  1,  ch.  1,  transl.  by  Robinson,  H.  D.,  1836. 

"  Ibidem,  ch.  9. 

'8  Ibidem,  ch.  17. 


124    THE  DEVELOPMENT  OF  ECONOMICS 

"Fragment  on  Government"  by  five  years  we  must  be  in- 
terested in  it,  even  though  it  was  Bentham  alone  who 
influenced  the  two  Mills,  father  and  son.  But  in- 
deed, Paley  in  his  "Principles  of  Moral  and  Political 
Philosophy,"  1785,  had  also  expressed  himself  in  words 
reminding  one  of  Bentham.-'^  Not  only  had  the  phrase 
"greatest  happiness  of  the  greatest  number"  been  coined 
by  that  time,  but  the  increase  of  population  as  a  proof 
of  quantitatively  growing  happiness  was  urged  by 
Paley.^°  If,  therefore,  a  wide-awake  thinker  like  Comte 
could  write  to  J.  S.  Mill  in  1841 :  Bentham  is  "the  main 
origin  of  what  is  called  political  economy,"  he  must  have 
had  in  mind  the  general  moral  effect  of  Bentham*s  dia- 
tribes rather  than  his  psychology. 

Yet  Bentham  may  well  be  put  in  a  class  by  himself,  for 
no  one  man  reflects  more  faithfully  the  temper  of  Utili- 
tarian economics.  In  his  works  a  religion  is  made  of  what 
Smith  considered  a  misunderstanding  of  facts.  We  are 
told  in  the  first  paragraph  of  the  "Introduction  to  the 
Principles  of  Morals  and  Legislation,"  1789,  that  "nature 
has  placed  mankind  under  the  governance  of  two  sover- 
eign masters,  pain  and  pleasure."  .  .  .  "They  govern  us 
in  all  we  do,  in  all  we  say,  in  all  we  think;  every  effort 
we  can  make  to  throw  off  our  subjection  will  serve  but 
to  demonstrate  and  confirm  it."  "^  And  so  we  read  in  the 
posthumous  Deontology:  "To  obtain  the  greatest  por- 
tion of  happiness  for  himself  is  the  object  of  every  ra- 
tional being.  Every  man  is  nearer  to  himself  than  he 
can  be  to  any  other  man;  and  no  other  man  can  weigh 
for  him  his  pains  and  pleasures."  .  .  .  "Dream  not  that 
men  will  move  their  little  finger  to  serve  you,  unless  their 
advantage  in  so  doing  be  obvious  to  them." 

"  See  edition  of  1811,  Bools  II,  ch.  C,  at  the  beginning. 

=0  Ibidem,   p.  470. 

*'  Opening  paragraph. 


UTILITARIANISM  126 

In  his  comment  on  the  "Table  of  Springs  of  Action," 
to  be  sure,  four  numbers  are  given  over  to  moral  or  re- 
ligious motives,^^  sympathy  too  appearing  in  the  list; 
but  at  bottom  of  course  there  was  no  need  of  such  dis- 
tinctions, since  all  pleasures  and  pains  were  quantities 
only.  In  fact,  Bentham  warns  us  more  than  once 
that  there  are  no  good  or  bad  pleasures  or  desires. ^^ 
The  idea  of  a  Moral  Sense  is,  partly  in  this  spirit, 
scorned  as  a  child's  fancy.  Neither  natural  law  nor 
social  compact  nor  intuition  have  anything  to  do 
with  ethics,  nor  are  they  necessary  to  explain  our  ac- 
tions. We  seek  pleasures,  and  that  is  the  alpha  and 
omega  of  social  processes.  Aversion,  not  desire,  for  in- 
stance, "is  the  emotion,  the  only  emotion,  which  labor 
taken  by  itself  is  qualified  to  produce.  .  .  ."  ^*  Eco- 
nomics has  to  deal  with  this  fundamental  in  human  na- 
ture. It  turns  on  questions  of  utility  and  sacrifice  as 
our  hedonistic  bias  defines  them.  "Utility  is  that  prop- 
erty in  any  object  whereby  it  tends  to  produce  benefit, 
advantage,  pleasure,  good,  or  happiness  ...  or  to  pre- 
vent .  .  .  pain,  evil,  or  unhappiness  to  the  party  whose 
interest  is  considered."  ^^  Desirable  results  consist  of 
such  possession  of  happiness.  The  results  count,  not  our 
intentions.  Action  is  good  or  bad,  we  are  told,  according 
to  the  "sum  total  of  its  consequences."  ^^ 

Bentham,  as  remarked,  found  enthusiastic  support  in 
influential  circles.  James  Mill,  well  reputed  for  his 
"History  of  the  East  India  Company,"  in  1829  pub- 
lished his  still  more  important  "Analysis  of  the  Phenom- 
ena of  the  Human  Mind"  on  which  his  son  John  Stuart 
Mill  was  brought  up,   and  whose  merits  impressed  men 

"See  edition  of  1817. 

"  Ibidem,  Observations. 

"  Ibidem. 

"  Principles  of  Morals  and  Legislation,  ch.  1,  §  8. 

"  Ibidem. 


126    THE  DEVELOPMENT  OF  ECONOMICS 

like  A.  Bain  and  H.  Spencer.  James  Mill  goes  back 
chiefly  to  Hartley  for  his  associationism,  but  he  also 
admires  Bentham.  The  whole  problem  of  logic,  ethics, 
and  education  he  believes  to  find  a  solution  in  the  prin- 
ciples of  consciousness  as  the  eighteenth  century  writers 
in  England  had  described  it.  All  phenomena  of  thought 
are  either  intellectual  or  active.  In  the  former  case  we 
deal  with  sensations  and  ideas ;  in  the  latter  with  feelings 
and  will.  But  both  sets  of  facts  are  subject  to  the  laws 
of  association,  and  not  merely  the  former.  The  old 
philosophy  of  Locke,  Hume,  and  their  epigones  is  pre- 
sented once  more,  and  the  moral  sense  dismissed  as  a  use- 
less fabrication.  The  line  of  division,  James  Mill  in  an 
unguarded  moment  notes,  is  not  between  intuitions  and 
experiential  judgments,  but  rather  between  the  moral 
and  the  useful,  the  first  being  a  human  thought,  but  the 
second  a  fact  inherent  in  objective  conditions. 

Needless  to  say,  this  slip  means  nothing  serious.  The 
rupture  between  moralism  and  hedonism  came  not  in 
James  Mill,  but  in  his  son,  and  then  only  after  Utili- 
tarian economics  had  reached  a  definite  form.  Whewell, 
whose  "Elements  of  Morality,"  1841,  enjoyed  popularity, 
and  who  influenced  J.  S.  Mill  through  his  "History  of  the 
Inductive  Sciences,"  may  have  encouraged  this  departure 
from  pure  hedonism.  On  the  other  hand  there  is  the 
"Autobiography"  in  which  J.  S.  Mill  confesses  that  as 
early  as  1827  he  came  to  believe  that  true  happiness  is 
attainable  only  by  "not  making  it  the  direct  end."  ^"^ 
Since  then  apparently  he  became  more  and  more  dissatis- 
fied with  the  Benthamite  doctrine,  and  later  tried  hard  to 
reconcile  the  old  interpretation  of  the  laws  of  conscious- 
ness and  of  human  nature  in  general  with  a  milder  ethics. 

"Ch.5. 


UTILITARIANISM  127 

That  he  failed  is  a  commonplace  to  students  of  philosophy 
and  ethics,  but  economists  have  rarely  benefited  by  it. 
Or  to  put  the  matter  differently :  It  has  been  overlooked 
that  Mill  in  his  "Utilitarianism,"  -^  planned  in  the  early 
fifties,  breaks  definitely  with  a  large  part  of  the  premises 
underlying  his  "Principles  of  Political  Economy"  written 
between  1845  and  1848.  Not  only  that,  but  this  latter 
work  itself  is  marred  by  an  ethico-historical  outlook  which, 
however  creditable  to  the  man  and  his  broader  philosophy, 
made  impossible  a  clean-cut  presentation  of  hedonistic 
economics.  We  feel  too  much  the  force  of  ideas  like 
these:  "The  firm  foundation  [of  altruism]  is  that 
of  the  social  feelings  of  mankind,  the  desire  to  be  in 
unity  with  our  fellow-creatures,  which  is  already  a 
powerful  principle  in  human  nature,  and  happily  one 
of  those  which  tend  to  become  stronger  .  .  .  from 
the  influences  of  advancing  civilization."  ^^  Or  again : 
The  end  of  happiness  is  "the  highest  and  most  harmoni- 
ous development  of  his  powers  to  a  complete  and  con- 
sistent whole."  ^^  Even  then  if  "will  is  the  child  of  de- 
sire," ^^  something  depends  on  the  kind  of  desire.  Even 
if  "the  sole  evidence  it  is  possible  to  produce  that  anything 
is  desirable  is  that  people  do  actually  desire  it,"  ^^  yet 
there  are  desires  of  various  meaning  to  society.  J.  S. 
Mill  candidly  confessed  ^^  that  Hartley's  associationism 
should  be  used  as  a  key  to  meliorism,  but  expected  sharp 
discrimination  on  the  part  of  students  between  egotistic 
and  social  values.  On  the  ethical  side,  therefore,  psy- 
chology could  not  appease  the  idealistic  yearnings  of  a 

"  See  his  definition  of  the  word  in  ch.  2. 

"  Ch.  3. 

"  Essay  on  Liberty. 

''  Utilitarianism,  ch.  4. 

"  Ibidem.     See  also  ch.  1. 

"  Mill's  Autobiography,  ch.  4. 


128    THE  DEVELOPMENT  OF  ECONOMICS 

J.  S.  Mill,  even  though  as  a  groundwork  for  logic  and 
methodology  he  found  it  most  valuable. 

Hence,  in  passing  over  to  the  methodological  basis  of 
Utilitarian  economics  we  must  not  associate  it  too  nar- 
rowly with  Mill's  "Principles  of  Political  Economy."  The 
former  owes  its  strength  and  precision  largely  to  the  as- 
sumptions first  succinctly  stated  in  Mill's  "Logic"  (pub- 
lished in  1843 ;  but  the  "Principles"  contain  both  more 
and  less  than  the  "Logic"  allowed.  It  was  what  J.  S. 
Mill  tried  to  prove  and  do,  and  not  what  he  succeeded 
in  proving  or  doing,  that  discloses  to  us  the  connection 
between   Utilitarian   and   Naturalistic   economics. 

J.  S.  Mill's  Eclecticism. — To  go  a  little  further  into  this 
matter.  If  one  looks  for  iron  consistency  in  J.  S.  Mill 
one  is  certain  to  be  disappointed,  for  a  mind  filled  with 
as  many  divergent  views  as  Mill's,  and  as  sympathetic 
toward  the  old  and  the  new  in  all  fields  of  scientific  or  so- 
cial endeavor,  was  not  likely  to  concentrate  upon  one 
single  system  of  thought.  The  title  of  his  treatise  on 
economics  is  itself  symptomatic  of  the  position  in  which 
he  found  himself  as  student  and  citizen.  He  discusses 
"Principles  of  Political  Economy  with  Some  of  Their  Ap- 
plications to  Social  Philosophy."  He  combines  in  it  the 
views  of  Ricardo  and  Senior,  Malthus  and  James  Mill 
his  father,  Th.  Chalmers  and  John  Rae,  Adam  Smith 
and  R.  Jones.  He  is  not  unmindful  of  the  advice  given 
by  men  like  Th.  B.  Macaulay,  or  by  A.  Comte,  the 
creator  of  a  Positive  Philosophy.  He  shows  historical 
leanings  even  while  emphasizing  the  static  premises 
underlying  Utilitarian  economics.  He  knows  the  eight- 
eenth century  philosoplicrs  and  writes  brilliantly  on 
Sir  William  Hamilton  and  Whcwell.  He  follows  with 
interest  the  communistic  theories  on  the  continent  and 
takes  up  the  cause  of  political  democracy.     Intuitionism 


UTILITARIANISM  I2d 

and  undiluted  hedonism  both  leave  their  impress  on  his 
theory  of  the  Good.  He  gives  us  "A  System  of  Logic, 
Ratiocinative  and  Inductive"  when  little  over  thirty  years 
of  age,  and  many  years  later  his  maturest  thoughts  on 
"Liberty"   and  "The  Subjection  of  Women." 

He  is  an  empiricist  who,  on  the  whole,  agrees  with 
the  phenomenalism  of  David  Hume.  Agnosticism  grows 
on  him  even  while  he  wishes  for  a  divine  justice.  Statics 
and  dynamics,  the  Laissez  Faire  of  Smith  and  scien- 
tific paternalism,  hedonism  and  eudsemonism, — these 
and  other  differences  are  considered  and  given  a  re- 
spectful hearing.  No  wonder  that  his  "Logic"  preaches 
what  the  "Principles  of  Political  Economy"  did  not 
apply.  No  wonder  that  breadth  entails  a  scattering  of 
ideas,  and  Mill  the  man  is  greater  even  than  Mill  the 
thinker.  No  mortal  could  sum  up  so  much  of  the  creeds 
and  interests  of  his  day  without  sacrificing  something  of 
the  inner  unity  of  argument.  Mill  stands  out  as  the 
culminating  figure  in  Utilitarian  economics,  but  one  must 
judge  him  by  his  premises  and  ideals  rather  than  by  spe- 
cific contributions  made  to  the  subject. 

Or  rather,  it  seems  better  to  view  his  economic  treatise 
as  a  minor  work,  which  cannot  yield  the  full  measure  of 
its  wisdom  without  being  read  in  the  light  of  his  earlier 
thought.  It  is  the  philosopher  that  speaks  in  the  "Prin- 
ciples" even  more  than  the  economist.  It  is  from  the 
standpoint  of  an  eclectic  who  seeks  to  reconcile  diverse 
beliefs  that  he  made  bold  to  restate  what  he  deemed  fun- 
damental to  social  science  and  durable  in  Smith's  "Wealth 
of  Nations."  His  ethology  saw  no  development.  His 
methods  were  those  of  a  speculator  in  ultimate  values. 
His  utilitarianism  broke  down  as  he  himself  practically 
confessed.  But  as  the  archtype  of  Utilitarian  economics 
in  the  narrow  sense  he  was  enabled  to  give  to  the  world 


130    THE  DEVELOPMENT  OF  ECONOMICS 

everything  essential.  We  cannot  do  better  than  study 
J.  S.  Mill,  even  if  he  wrote  retrospectively  for  the  most 
part,  and  not  prospectively. 

J.  S.  Mill's  Methodology. — Indeed,  this  preeminence  of 
Mill  the  economist  will  be  granted  the  less  reluctantly 
since  his  methodology  is  incomparably  the  most  com- 
plete in  economic  literature.  The  eighteenth  century 
thinkers  in  England  had,  as  shown,  attempted  to  base 
sociology  upon  an  analysis  of  human  nature;  but  the 
recondite  problem  of  the  method  and  delimitation  of  so- 
cial science  they  hardly  touched.  There  are  no  logicians 
for  us  to  consult  on  this  point.  Neither  Hobbes,  Locke, 
nor  Hume  had  gone  beyond  the  generalities  of  social  logic. 
The  Moralists — excepting  Hartley  and  Ferguson — had 
not  even  suggestions  to  make.  Realists  like  Th.  Reid, 
D.  Stewart,  and  Sir  W.  Hamilton  continued  to  empha- 
size problems  of  epistemology.^*  The  prevailing  view- 
point was  the  empirical,  although  of  course  tinged  phe- 
nomenalistically  in  Hume's  style;  but  the  theory  and 
history  of  Induction  had  not  yet  found  a  worthy  ex- 
pounder. Even  thinkers  like  Th.  Brown,  the  author  of 
the  "Lectures  on  the  Philosophy  of  the  Human  Mind," 
published  in  1820,  and  J.  F.  W.  Herschel  whose  "Pre- 
liminary Discourse  on  the  Study  of  Natural  Philoso- 
phy" (1831)  ^^  was  not  without  influence  on  his  genera- 
tion, contributed  little  to  the  topic  that  J.  S.  Mill  made 
his  own  by  one  single  stroke,  in  the  publication  of  his 
"System  of  Logic,  Ratiocinative  and  Inductive"  in  1843. 

It  is  here  that  we  find  heaped  up  in  one  volume  all  the 
elements  that  were  useful  in  the  formal  development  of 

"  Whewell's  (W.)  works,  though  important  for  Mill's  treatmont  of 
logic,  did  not  deal  with  methods  in  social  science.  For  Stewart  (D.)  ou 
causation  see  his  Elements  of  the  Philosophy  of  the  Human  Mind,  Part 
II,  ch.  2. 

"  See  his  remarks  on  law  and  cause  in  the  original  edition,  vol.  I, 
p.  85,  etc. 


UTILITARIANISM  131 

economics  as  a  science.  On  the  psychological  side  these 
factors  were  the  acceptance  of  human  nature  as  the  key 
to  social  processes  and  to  economics  in  particular;  the 
rejection  of  free-will — as  formerly  understood — and  the 
establishment  of  a  causal  nexus  between  all  states  and 
actions  of  consciousness ;  the  derivation  of  ideas  from 
impressions,  the  dualism  of  Mind-Matter  being  implied 
though  not  openly  acknowledged;  the  stress  on  associa- 
tion principles  and  on  the  transfer  of  desire  from  an 
original  end  to  means  for  securing  it ;  and  not  least  of 
all  the  supremacy  of  the  pain-pleasure  calculuSc  But 
on  the  logical  side  we  have  also  to  note  as  important: 
the  sharp  differentiation  between  induction  and  deduc- 
tion; the  reliance  upon  Newtonian  forces  as  a  model  for 
psychic  forces  which,  within  the  social  process,  gave  rise 
to  either  a  composition  or  a  chemical  reaction  of  elements. 
And  then  again  there  was  the  addition  of  a  dynamic  to 
the  static  concept,  methods  of  proof  being  adapted  to 
both,  according  to  viewpoint  or  materials  studied  by 
the  economist. 

The  earlier  part  of  Mill's  "Logic"  ^^  contains  much 
of  significance  for  his  sixth  Book  in  which  social  science 
is  given  its  methodology.  It  is  on  the  ground  of  Mill's 
definition  of  "Cause,"  and  of  the  difference  between  me- 
chanical and  chemical  interrelations  of  events  that  eco- 
nomics is  eventually  recommended  to  a  deductive  method, 
the  reservations  to  the  contrary  being  of  a  minor  sort. 

Cause  is  defined  as  "the  sum  total  of  the  conditions, 

positive  and  negative,  taken  together;  the  whole  of  the 

contingencies  of  every  description,  which  being  realized, 

the  consequent  invariably  folloAvs."  ^"^     But  early  in  his 

treatise  Mill  points   out  the  decisive   difference  between 

"  The  edition  here  used  is  that  of  Harper  Bros.,  New  York,  1874. 
"  Book  III,  ch.  5,   §  3. 


132     THE  DEVELOPMENT  OF  ECONOMICS 

a  case  where  several  causes  act  merely  by  way  of  sum- 
mation, and  another  in  which  the  effect  is  quite  unlike 
the  causes,  as  for  instance  in  a  compound  built  chem- 
ically out  of  its  elements.  The  recognition  of  this  dif- 
ference Mill  records  in  his  "Autobiography"  as  a 
memorable  moment  in  his  life.  He  says:  "I  now 
[that  is  shortly  before  1830  probably]  saw  that  a  sci- 
ence is  either  deductive  or  experimental  according  as,  in 
the  province  it  deals  with,  the  effects  of  causes  when  con- 
joined are  or  are  not  the  sums  of  the  effects  which  the 
same  causes  produce  when  separate.  It  followed  that 
politics  must  be  a  deductive  science."  ^^  And  again  in 
his  "Logic":  This  also  "explains  why  mechanics  is  a 
deductive  or  demonstrative  science,  and  chemistry  not. 
In  the  one  we  can  compute  the  effects  of  all  combinations 
of  causes,  whether  real  or  hypothetical,  from  the  laws 
which  we  know  to  govern  those  causes  when  acting  sepa- 
rately; because  they  continue  to  observe  the  same  laws 
when  in  combination,  which  they  observe  when  separate. 
Whatever  would  have  happened  in  consequence  of  each 
cause  taken  by  itself,  happens  when  they  are  together, 
and  we  have  only  to  cast  up  the  results.  Not  so  in  the 
phenomena  which  are  the  peculiar  subject  of  the  science 
of  chemistry.  There,  most  of  the  uniformities  to  which 
the  causes  conformed  when  separate,  cease  altogether 
when  they  are  conjoined;  and  we  are  not,  at  least  in  the 
present  state  of  our  knowledge,  able  to  foresee  what  re- 
sult will  follow  from  any  new  combination,  until  we  have 
tried  it  by  specific  experiment."  ^^  The  first  is  an  in- 
stance of  the  Composition  of  Causes ;  ^^  the  last  one  of 
chemical  action. 

Nonetheless,  Mill  admits  that  in  either  case  the  law  of 

"  Page  160. 

"  Book  III,  ch.  6,  5  1. 

<»  Ibidem. 


UTILITARIANISM  133 

plurality  of  causes  is  important,  meaning  that  while  a 
cause  may  be  regularly  followed  by  the  same  result,  yet 
tills  effect  may  be  due  to  more  than  any  one  given  cause.  ^^ 
Hence,  while  Mill's  underlying  thought  is  really  a  quanti- 
tative measurement  of  events  in  the  spirit  that  physicists 
measured  mass  and  force,  social  events  become  perplexing 
through  the  intricacy  of  causal  relations,  and  through 
an  Intermixture  of  Effects  that  the  natural  scientist  is 
scarcely  aware  of.  In  short,  the  fact  that  social  students 
can  aim  only  at  tendencies  in  the  long  run,*^  not  at  exact 
magnitudes  for  a  particular  series,  is  explainable  through 
this  interweaving  of  countless  events  whose  numbers  may 
never  be  determinable.  So  the  Canons  of  Induction  find 
a  limit,  to  say  nothing  of  other  objections. 

Now,  this  analysis  of  the  causal  nexus  proved  momen- 
tous for  the  working  out  of  economic  methodology,  not 
merely  in  MilFs  work,  but  in  the  subsequent  inquiries  which 
after  all  did  not  go  much  beyond  Mill. 

But  we  must  first  look  at  the  psychological  substratum 
on  which  the  classic  doctrine  was  erected.  Namely,  the 
application  of  Mill's  inductive  logic  to  social  science, 
though  ever  kept  in  mind,  and  perhaps  the  occasion  for 
the  inductive  teachings  in  general,  came  only  through 
eighteenth  century  sensationalism,  whose  essentials  Mill 
had  mastered  early  in  life. 

At  the  outset  the  doctrine  of  free-will  is  abandoned  as 
untenable  in  the  light  of  associational  psychology.*^ 
It  is  shown  that  mental  states  follow  a  set  of  laws  as 
genuine  as  the  Newtonian.  Motives  are  held  to  proceed 
from  ideas,  and  these  from  impressions  whose  intercon- 
nections obey  certain  well  known  laws  of  association  (of 
resemblance,  continuity,  and  contiguity).     The  teleologi- 

"  Book  III,  ch.  10,   §  5. 

"  Ibidem. 

«  Book  VI,  ch.  2,  §  3. 


134    THE  DEVELOPMENT  OF  ECONOMICS 

cal  notion  of  theologians  does  not  stand  an  acid  test ;  of 
that  Mill  is  convinced.  Causation  rules  universally;  the 
purposive  view  of  human  actions  is  simply  on€  way  of  look- 


Chart  Three — The  Sources  of  J.  S.  Mill's  Psychology 

Hobbes,  Th.  Newton,  I,  Locke,  J. 


Tucker,  A. 


Hume,  D, 


Mill,  Jas. 


Mill,  J.S. 


ing  at  a  situation  whose  final  meaning  the  moralist  will 
never  grasp. 

Hence  too  the  way  to  economics  lies  through  psychol- 
ogy, ethology,  and  sociology,  the  first  giving  cues  to  all 
the  rest. 

Mill  in  this  matter  departed  not  at  all  from  his  prcde- 


UTILITARIANISM  135 

cessors.  He  built  on  Hobbes — indirectly  and  to  a  degree 
— on  Locke,  Hartley,  Hume,  and  his  father,  Jas.  Mill. 
Tucker  and  Priestley  were  intermediaries  in  that  they 
popularized  the  general  argument,  and  Newton  supplied 
a  simile  that  for  Hartley  no  doubt  had  a  deeper  import. 
So  the  line  of  descent  of  J.  S.  MilFs  psychology  is 
approximately  as  given  in  Chart  III. 

Newton's  theory  of  vibrations  was  used  by  Hartley 
in  his  "Observations  on  Man,  His  Frame,  His  Duty  and 
His  Expectations,"  1748,  to  provide  a  materialistic  set- 
ting for  his  view  of  sensations.  What  Locke  had  said 
earlier  on  sensations  and  ideas  served  to  confirm  Mill, 
especially  after  due  regard  for  the  later  improvements 
of  Hume  and  Jas.  Mill.  The  scheme  was  simple  enough, 
and  well  epitomized  in  J.  S.  Mill's  classification  of  all 
mental  facts  under  the  heading:  Sensations,  Thoughts, 
Emotions,  and  Volitions.**  From  the  first  were  derived 
the  remainder.  Impressions,  through  the  senses,  made 
possible  ideas,  both  the  simple  and  the  complex,  the  latter 
being  constructed  out  of  the  simple  ones  in  the  way  that 
blocks  produce  a  mosaic.*^  In  Priestley's  words :  "The 
simple  ideas  of  sensation  run  into  clusters  and  combina- 
tions by  association;  and  each  of  these  will,  at  last, 
coalesce  into  one  complex  idea  by  the  approach  and  com- 
mixture of  the  several  compounding  parts.  *^  All  of 
which  Jas.  Mill  expressed  in  the  sentence:  "Brick  is 
one  complex  idea;  mortar  is  another  complex  idea;  these 
ideas,  with  ideas  of  position  and  quantity,  compose  my 
idea  of  a  wall."  *^     (Behold  the  birth  of  concepts!) 

The  supreme  mental  laws  then  were  memory  and  asso- 
ciation, although  the  author  of  the  "Logic"  described 

"  Ibidem,  ch.  4,  §  1. 

"  For  some  reservations  Mill  makes  on  this  point  see  ch.  4,  J  3. 

"  Hartley's  Theory  of  the  Human  Mind,  edit,  of  1790,  vol.  I,  p.  18. 

"  Analysis  of  the  Human  Mind,  edit,  of  18G9,  vol.  I,  ch.  3. 


136    THE  DEVELOPMENT  OF  ECONOMICS 

them  in  different  words. ^^  Among  the  universal  human 
traits  that  gave  a  soHd  basis  to  sociological  ambitions 
were  these  two :  Our  faculty  to  remember,  ideas  being 
compounded  and  recompounded  out  of  simpler  ingredi- 
ents, and  the  comprehensive  law  of  association  which 
governed  not  only  ideas,  but  also  feelings,^^  as  Th. 
Brown  had  been  the  first  to  suspect.  Thanks  to  such 
principles  there  arose  uniformities  of  succession  of 
"states  of  mind."  ^°  Ideas  were  the  fountain  of  all  social 
happenings.  Regularities  in  history,  as  well  as  our  hopes 
for  a  law  of  progress,  had  to  be  traced  back  to  the  afore- 
said fundamentals.  (Note  then,  incidentally,  how  far 
Mill,  the  friend  of  socialism  and  the  master  mind  of  classic 
economics,  was  from  an  Economic  Interpretation  of 
History  in  the  manner  of  Karl  Marx!) 

Now,  on  the  strength  of  such  laws  Mill  sketched  out  an 
Ethology  ^^  that  might  yield  laws  of  the  formation  of 
human  character  such  as  Hume  had  aspired  to  but  had 
failed  to  locate.  It  was  remarked  even  here  that  deduc- 
tion must  guide  the  inquirer,  because  of  the  multiplicity 
of  data  and  the  composition  of  causes  constituting  the 
warp  and  woof  of  these  moral-psychological  events. 

However,  what  Mill  is  driving  at  is  of  course  not  merely 
this  science  of  ethics,  but  rather  a  methodology  for  all 
social  searchings,  and  for  economics  more  especially.  So 
we  are  told  first  that  sociology  springs  from  psychology, ^- 
and  that,  while  the  number  of  events  to  be  related  is 
virtually  indeterminate,  and  certainly  not  reproducible 
at  will,^^  yet  the  mode  of  causal  relation  is  a  mechanical 

"Ch.  4,  s  3. 

"  Ibidem. 

«•  Ibidem,  §  2. 

■»  Ch.  5. 

«  Ch.  «,  $  2,  and  ch.  10. 

"Book  III,  ch.  10,  S  8. 


UTILITARIANISM  13T 

one,  as  mentioned  before  under  the  caption  Composition 
of  Causes.''* 

It  is  a  cardinal  point  for  our  understanding  of  Mill's 
methodology,  that  he  identified  social  causation  with  a 
law  of  the  composition  of  causes,  not  with  chemical  inter- 
actions. What  he  had  come  to  believe  about  1830  he  now 
reaffirms.  He  writes :  "In  social  phenomena  the  Com- 
position of  Causes  is  the  universg,l  law."  ^^  .  .  .  "How- 
ever complex  the  phenomena,  all  their  sequences  and 
coexistences  result  from  the  laws  of  the  separate  elements. 
The  effect  which  is  produced,  in  social  phenomena,  by  any 
complex  set  of  circumstances,  amounts  precisely  to  the 
sum  of  the  effects  of  the  circumstances  taken  singly:  and 
the  complexity  does  not  arise  from  the  number  of  the 
laws  themselves,  which  is  not  remarkably  great;  but  from 
the  extraordinary  number  and  variety  of  the  data  of 
elements.  .   .   ."  '"*' 

Because  of  this  fact  Mill  pronounces  social  science  to 
be  a  field  for  direct  deduction,  adding  merely :  "not  indeed 
after  the  model  of  geometry,  but  after  that  of  the  higher 
physical  sciences.  It  [social  science]  infers  the  law  of 
each  effect  from  the  laws  of  causation  upon  which  that 
effect  depends, — by  considering  all  the  causes  which  con- 
junctly influence  the  effect,  and  compounding  their  laws 
with  one  another."  ^^  This  is  the  Concrete  Deductive 
Method ;  and  nothing  short  of  stupidity  would  urge 
induction  for  this  purpose,  "The  vulgar  notion  that  the 
safe  methods  on  political  subjects  are  those  of  Baconian 
induction,  that  the  true  guide  is  not  general  reasoning, 
but  specific  experience,  will  one  day  be  quoted  as  among 

"  Ibidem,  ch.  7,   §  1. 
"  Book  VI,  ch.  7,  §  1. 
""  Ch.  9.   §  1. 
"  Ibidem. 


138    THE  DEVELOPMENT  OF  ECONOMICS 

the  most  unequivocal  marks  of  a  low  state  of  the  specu- 
lative faculties  in  any  age  in  which  it  is  accredited."  ^® 

Only  two  admissions  are  granted  by  way  of  amplifi- 
cation. Namely,  the  premises  of  social  science  will  have 
to  be  established  chiefly  inductively,^^  albeit  thereafter 
everything  is  deduction;  and  secondly,  on  account  of  the 
Intermixture  of  Effects  the  student  of  economics  cannot 
expect  to  formulate  rigid  laws  by  precise  measurements. 
No,  he  can  deal  only  with  tendencies  or  averages,^^  though 
this  is  not  detracting  from  the  merit  of  his  work,  or  from 
the  potency  of  economic  principles.  At  any  given 
moment,  that  is  to  say  from  a  static  standpoint,  events 
will  shape  themselves  in  obedience  to  the  laws  of  mind  and 
of  the  composition  of  causes.  Long-run  effects  will  be 
ascertained  beyond  cavil.  Though  relative  to  place  and 
periods,  social  laws  will  have  wide  prevalence.  Deduction 
will  cover  all  needs  provided  we  do  not  attribute  every 
situation  or  sequence  to  a  single  motive  as  Bentham 
demanded  to  suit  his  hedonistic  program.  With  a  side- 
long glance  of  scorn  at  this  Benthamite  "geometrical" 
method  ^^  Mill  continued  his  argument,  clinching  it  with 
two  points  that,  although  not  vital,  deserve  mention  by 
way  of  closing  our  account. 

In  the  first  place  Mill  came  under  the  influence  of 
A.  Comte,  as  has  been  shown  by  a  host  of  investigators 
from  various  angles.  To  Mill's  thinking  Comte  con- 
tributed the  historical  viewpoint.  This  Mill  had  hereto- 
fore not  reckoned  with,  or  at  any  rate  not  sufficiently 
considered  in  his  methodology.  It  must  have  been  a 
perturbing   item,    since   economics    so    far   had    adhered 

"Book  III,  ch.  10,   §  8. 
"Book  VI,  ch.  4. 
•"Ch.  9,  §  1. 
"  Ch.  8. 


UTILITARIANISM  139 

rigidly  to  a  static  view,  excepting  only  some  heterodox, 
practically  unknown,  writings  of  a  coUectivistic  hue. 

How  was  Mill  to  find  use  for  this  vista  that  revealed 
mankind  as  a  troop  traveling  at  slow  gait  over  long  dis- 
tances of  time,  changing  its  route,  inconstant  in  its  pro- 
fessions of  faith,  and  harassed  more  by  its  own  institu- 
tional creations  than  by  obstacles  of  nature? 

Whatever  Comte*s  shortcomings  as  a  logician  and 
metaphysician,  it  was  plain  to  Mill  that  another  avenue 
of  approach  to  social  valuations  had  been  opened,  and 
that  the  simplicity  of  Humian  psychology  had  to  be  sup- 
plemented by  studies  for  which  deduction  could  not  serve. 
Comte  alone,  we  are  told,  "has  seen  the  necessity  of  thus 
connecting  all  our  generalizations  from  history  with  the 
laws  of  human  nature ;  and  he  alone  therefore  has  arrived 
at  any  results  truly  scientific.  .  .  ."  ^^  A  method 
ancillary''  to  the  deductive  is  consequently  in  order;  and 
"this  method,  which  is  now  generally  adopted  by  the  most 
advanced  thinkers  on  the  continent,  and  especially  in 
France,  consists  in  attempting,  by  a  study  and  analysis 
of  the  general  facts  of  history,  to  discover  .  .  .  the  law 
of  progress.  .  .  ."  ^^  Given  certain  laws  of  mind  and  of 
behavior,  what  has  history  to  say  by  way  of  corrobora- 
tion or  refutation,  this  is  the  question.  Deduction  and 
induction  will  work  together  to  supply  the  answer.  An 
Inverse  Deductive  Method  thus  results,  and  sociology 
becomes  a  philosophy  of  history  that  discloses  the 
"empirical  laws  of  society,"  connecting  them  "with  the 
laws  of  human  nature  by  deductions  showing  that  such 
were  the  derivative  laws  naturally  to  be  expected  as  the 
consequences  of  those  ultimate  laws."  ®* 

Whether  this  is  a  successful  manner  of  linking  statics 

«2  Ch.  10,  $  3. 
"^  Ibidem. 
"  Ibidem,  §  4. 


140    THE  DEVELOPMENT  OF  ECONOMICS 

and  dynamics  need  not  now  engross  us,  but  assuredly  its 
effect  upon  Mill's  "Principles  of  Political  Economy"  were 
not  negligible.^^  On  the  other  hand,  it  is  equally  certain 
that  the  second  of  the  two  qualifications  of  the  deductive 
method  urged  by  Mill  follows  much  more  naturally  from 
his  conception  of  mental  phenomena ;  to-wit.  Mill's  empha- 
sis upon  economics  as  a  separate  science,  basing  deduction 
on  a  relatively  small  number  of  elements  of  hum«n  nature, 
which  as  premises  must  either  be  accepted  or  render  null 
and  void  all  subsequent  conclusions.  ^^ 

Different  social  facts  were  acknowledged  to  spring  from 
different  classes  of  causes  that  could  be  treated  sepa- 
rately precisely  because  of  the  laws  of  memory  and  of 
association.  For  the  economic  motives  were  so  all- 
powerful,  and  the  transfer  of  desire  from  ends  to  means 
essential  to  their  realization  was  so  incontestable,  that 
economics  attained  thereby  a  distinct  significance,  not 
to  say  scope  and  subject  matter.  "Different  species  of 
social  facts  are  in  the  main  dependent,  immediately  and 
in  the  first  resort,  upon  different  kinds  of  causes ;  and 
therefore  not  only  may  with  advantage,  but  must  be 
studied  apart,  .  .  ."  ^^  Thus  by  reasoning  from  one 
law  of  nature  "a  science  is  constructed  which  has  received 
the  name  of  political  economy."  ^^  .  .  .  "It  makes 
entire  abstraction  of  every  other  human  passion  or 
motive  except  those  which  may  be  regarded  as  perpetu- 
ally antagonizing  principles  to  the  desire  of  wealth, 
namely  aversion  to  labor  and  desire  of  the  present  enjoy- 
ment of  costly  indulgences."  *'^  .  .  .  "The  political  econ- 
omist inquires  what  are  the  actions  which  would  be  pro- 
duced by  this  desire,  if  within  the  departments  in  question 

"^  Book  IV  is  the  by-product  of  this  study  of  Comte. 
8«rh.  4  of  Logic. 
«'  Ch.  ».  §  3. 
"  Ibidi'in. 
"  Ibidem. 


UTILITARIANISM  141 

it  were  unimpeded  by  any  other.  In  this  way  a  nearer 
approximation  is  obtained,  than  would  otherwise  be  prac- 
ticable, to  the  real  order  of  human  affairs  in  those 
departments."  "^^  Owing  to  the  fact  that  "the  mode  of 
production  of  all  social  phenomena  is  one  great  case  of 
Intermixture  of  Laws"  '^  economic  laws  will  then  repre- 
sent long-run  tendencies. 

With  this  understanding  the  economist  may  lay  claim 
to  scientific  formulas  no  less  than  a  physicist.  Indeed — 
and  casually  speaking — he  need  not  even  insist  upon  the 
egotistic  presuppositions  which  seem  to  inhere  in  his 
premises,  for  as  stated  earlier:  Desire  will  reach  also 
for  things  non-economic,  owing  to  the  law  of  transfer 
of  interest  by  association.  Or  in  the  words  of  Mill: 
"It  is  at  least  certain  that  we  gradually,  through  the 
influence  of  association,  come  to  desire  the  means  without 
thinking  of  the  end.  ...  As  we  proceed  in  the  formation 
of  habits,  and  become  accustomed  to  will  a  particular  act 
or  a  particular  course  of  conduct  because  it  is  pleasurable, 
we  at  last  continue  to  will  it  whether  it  is  pleasurable  or 
not."  ^"  For  this  reason  regularity  of  conduct  is  possible 
and  economic  analysis  made  less  risky,  while  on  the  other 
hand  habit  or  custom  loom  up  as  interferences  with  the 
rational  play  of  demand  and  supply. 

Mill,  it  will  be  seen,  labored  cautiously  in  constructing 
his  logic  of  economics. ^^  He  went  step  by  step  from 
premises  to  conclusions,  and  to  further  conclusions,  inter- 
lacing his  argument  at  points  with  enough  shrewd  and 
convincing  observations  from  common  experience  to  be 
sure    of    a    sympathetic    hearing.     Logically    viewed    his 

'0  iBidem. 

'<  Ibidem,  §  2. 

'=  Ch.  2.  §  4. 

"  For  an  illuminating  discussion  of  the  genesis  of  Mill's  Logic  see 
Patten.  S.  N.,  in  his  Development  of  English  Thought,  1899,  in  which 
emphasis  is  put,  however,  on  somewhat  different  points.  See  especially 
pages  324-335. 


14.2     THE  DEVELOPMENT  OF  ECONOMICS 

treatise  is  the  prerequisite,  whether  frankly  espoused  or 
not,  of  all  Utilitarian  and  Marginal  economics.  By  some 
the  superlative  value  of  the  "Logic"  was  overlooked. 
Others  prefaced  their  economics  with  thoughts  along 
similar  lines,  though  much  more  perfunctorily,  and  a  few 
were  doubtless  aware  of  everything  implied  in  this  mighty 
essay  on  social  methodology.  From  the  historical  stand- 
point Mill  furnished  a  climax  almost  too  grand  to  be  fully 
understood,  while  to  philosophers  the  best  is  of  course 
not  in  Book  Six  of  the  "Logic,"  but  in  the  Canons  of 
Induction  upon  which  Mill  staked  his  reputation  as 
logician.  At  all  events.  Mill  alone  succeeded  in  framing 
a  sequence  of  thought  that  justified  everything  committed 
or  omitted  by  orthodox  economists. 

This  giant,  who  encompassed  the  knowledge  of  his  day 
as  few  ever  have,  also  conquered  unassisted  the  difficulties 
that  Hume  had  once  before  perceived,  that  economists  of 
the  nineteenth  were  bound  to  respect,  and  which  the 
twentieth  century  may  perhaps  again  scrutinize,  if  not 
to  solve  them  anew,  certainly  to  appreciate  what  they 
mean  for  the  future  of  economics. 


CHAPTER  FIVE 
UTILITARIANISM  (Continued) 

II.   Principi.es 

The  Supremacy  of  Mill's  Logic. — On  the  foundations 
laid  by  the  Benthamists,  and  by  John  Stuart  Mill  in  his 
several  philosophical  and  economic  works,  economics  grew 
into  a  full-fledged  science,  functioning  independently  of 
other  social  inquiries  and  for  a  long  time  undisturbed  by 
any  protests  from  outside.  Nothing  particularly  new 
was  added  in  matters  of  psychology  or  methodology. 
At  times  the  premises  were  restated  and  amplifications 
offered  that  helped  to  remind  economists  of  the  broader 
aspects  of  their  discipline;  but  none  of  these  discussions 
exerted  any  marked  influence.  In  the  United  States 
H.  C.  Carey  was  the  first  to  unite  with  a  general  knowl- 
edge of  natural  science  a  deep  interest  in  philosophy, 
as  well  as  originality  in  the  treatment  of  economic  prob- 
lems. No  American  of  the  nineteenth  century  can  claim 
more  justly  our  high  regard  for  labors  well  done  than  this 
zealous  champion  of  monism.  Scattered  through  his 
many  volumes  we  find  ideas  on  metaphysics,  psychology, 
mathematics,  physics  and  chemistry,  biology  and  anat- 
omy, ethics  and  logic,  sociology  and  history,  in  the  light 
of  which  his  economic  views  should  be  read  if  we  wish 
to  comprehend  him  thoroughly.  What  Comte  was  to 
France  and  J.  S.  Mill  to  England,  Carey  in  a  way  meant 
to  America.    He  did  not  despise  methodology  even  though 

143 


144     THE  DEVELOPMENT  OF  ECONOMICS 

he  dealt  with  it  perfunctorily.  Like  Smith  he  learned 
much  from  his  own  peculiar  environment,  but  there  was 
something  to  start  with  that  was  independent  of  sur- 
roundings, nay  even  perhaps  at  variance  with  them. 

In  France  and  Germany  economics  underwent  material 
changes  which  will  soon  have  to  be  noted,  but  so  far  as 
the  groundwork  of  its  orthodox  literature  is  concerned  it 
was  either  of  English  design,  or  else  hardly  in  evidence. 
Only  after  the  rise  of  the  German  Empire  do  we  find 
the  methodological  introductions  wliich  have  since  become 
so  familiar,  and  then  they  are  devoid  of  distinct  merits. 
What  the  Germans  added  on  this  topic  belongs  either  to 
Historism  or  to  Marginism.  For  the  rest,  the  develop- 
ments pertain  to  principles,  and  not  to  premises. 

Neither  can  anything  more  complimentary  be  said  of 
French  or  Italian  economics,  until  we  reach  the  period 
of  Marginism.  Indeed,  in  England,  too.  Mill  occupies  a 
unique  position,  since  no  student  of  economic  methodology 
ever  approached  the  profundity  of  his  own  analysis  or 
the  thoroughness  of  his  treatment.  Characteristic  enough 
that  neither  Maltlms  nor  Ricardo  nor  Senior  concerned 
themselves  seriously  with  the  presuppositions  of  their 
science,  and  that  later  writers  either  restated  the  bulk 
of  Mill's  argument — in  so  far  as  the  problem  was  appre- 
ciated at  all — or  else  took  to  the  Historical  viewpoint, 
whose  logic  certainly  was  not  that  of  the  Utilitarians  ! 
Bagehot  has  secured  for  himself  an  honorable  place  in 
the  field,  but  did  not  complete  his  investigations.  Henry 
Sidgwick,  like  Fawcett  and  Cairnes,  gave  prestige  to  the 
theory  of  economics,  but  apparently  used  his  originality 
chiefly  for  the  "Methods  of  Ethics,'*  L^tilitarianism  as 
mere  ethics  being  weiglied  again  and  found  wanting. 
Macleod  adds  notliing  new,  nor  can  it  be  said  of  Cairnes* 
"Character  and  Logical  Method  of  Political  Economy" 


UTILITARIANISM  146 

that  an  advance  was  made  over  the  position  of  J.  S.  Mill. 
In  fact,  from  the  very  nature  of  those  lectures  we  might 
perhaps  expect  them  to  be  general  and  fragmentary 
rather  than  exhaustive.  Still  later  comes  Marshall  and 
Keynes,  whose  "Scope  and  Method  of  Political  Economy," 
1891,  went  more  carefully  into  methodological  questions 
than  any  work  except  Mill's.  Yet  in  both  these  cases  our 
admiration  will  be  mingled  with  regret,  for  again  the  new 
is  either  lacking  entirely,  as  in  Marshall,  or  it  relates 
simply  to  such  discussions  as  had  been  raised  by  Histor- 
ism  and  settled  there  with  even  greater  success.  Broadly 
speaking  then  Mill's  "Logic"  has  neither  peer  nor  suc- 
cessor in  point  of  development  within  Utilitarian  eco- 
nomics. Progress  was  made  in  details  of  doctrine,  i.  e., 
principles,  but  not  in  matters  of  logic  where  the  premises 
were  most  naturally  put  to  a  test. 

The  Field  of  Economics. — Turning  now  to  these  leading 
principles  which  directly  or  indirectly  were  based  on  the 
premises  so  far  considered. 

To  begin  with.  Utilitarian  economics  almost  from  the 
start  restricted  its  investigations  to  the  facts  of  exchange, 
i.  e.,  monetary  measurements.  The  psychology  and  logic 
used  did  not,  in  fact,  leave  any  choice,  though  inconsist- 
ently an  objection  was  raised  by  some  writers.  Mill  had 
shown  why  economic  motives  might  be  set  aside  as  raw 
material  for  a  new  science  of  winch  Adam  Smith  was  not 
altogether  certain.  The  Benthamites  had  spread  the 
gospel  of  hedonism  as  a  key  to  production  and  pricing. 
Price  was  already  understood  to  represent  a  ratio  of 
exchange  without  which  neither  income  could  be  explained 
nor  the  identity  of  physical  and  social  laws  of  nature 
be  adequately  proven.  If  Mill  was  right,  clearly  eco- 
nomics was  a  science  of  exchanges ;  and  so  Archbishop 
Whately  declared  ere  long. 


146    THE  DEVELOPMENT  OF  ECONOMICS 

The  agreement  was  pretty  general,  as  may  be  judged 
from  a  few  quotations.  Jennings,  e.  g.,  who  is  anything 
but  a  docile  mouthpiece  for  other  people's  opinion,  admits 
that  economics  deals  simply  with  "relations  of  human 
nature  and  exchangeable  objects.  .  .  ."  ^  McCuUoch, 
J.  R.,  in  his  "Principles  of  Political  Economy,"  1825, 
writes :  "Nothing  which  is  not  possessed  of  exchangeable 
value,  or  which  will  not  be  received  as  an  equivalent  for 
something  else  which  it  has  taken  some  labor  to  produce 
or  obtain  can  ever  properly  be  brought  within  the  scope 
of  political  economy."  ^  Similarly  Cairnes  in  his  "Logical 
Method,"  ^  cited  before,  and  the  continental  writers 
including  some  with  a  penchant  for  historical  interpre- 
tations. Wagner,  for  instance,  defines  economy  (Wirt- 
schaft)  as  the  "study  of  labor-activities  aiming  at  a 
continuous  supply  and  use  of  goods  for  consumption, 
these  activities  proceeding  methodically  to  that  end 
within  a  closed  or  at  any  rate  hypothetically  closed  field 
of  human  wants  and  gratifications."  *  So  also  French 
economists  when  not  avowedly  solidaristic  in  their  out- 
look. Or  if  we  care,  we  can  go  back  to  Ricardo's 
"Principles  of  Political  Economy,"  to  Senior  and 
Torrens  and  Jas,  Mill,  or  consider  the  indirect  evidence 
in  treatises  emphasizing  price  and  income.  J.  S.  Mill 
himself  says  in  his  "Principles,"  1848:  "Things  for  which 
nothing  could  be  obtained  in  exchange,  however  useful 
or  necessary  they  may  be,  are  not  wealth  in  the  sense  in 
which  the  term  is  used  in  Political  Economy."  ^ 

Specific  Premises. — In  keeping  with  this  sentiment  was 

'  Jennings,  R.     The  Natural  Elements  of  Political  Economy,  p.  G3. 

'  Pages  10-17. 

'  Page  26.      See  also   pp.  34-37. 

*  Lehr-  und  Ilandbuch  der  Politischen  Okonomie,  vol.  1  ;  Gnindlegung 
dor  Volkswlrtschaft,  3.  edit..  1892.  p.  81.  See  al.so  Sclioenberg,  G.,  Iland- 
buch der  Politischen  Okonomie,  edit,  of  1890,  vol.  1,  p.  9. 

'  Page  24.  See  also  Leroy  Bcauliou,  1'.,  Trait6  Th6oretique  et  Pratique 
d'Economie   Politique,   4.   edit.,   vol.    1,   p.    18. 


UTILITARIANISM  147 

the  assumption  by  the  great  majority  of  writers  of  cer- 
tain facts,  legal  or  psychological  in  a  narrower  sense, 
the  denial  of  which  would  invalidate  the  various  doctrines 
on  price,  distribution,  and  production.  The  two  sets  of 
premises  were  commonly  kept  together,  even  though 
logically  it  had  no  warrant.  Thus,  while  Smith  had 
gone  out  of  his  way  to  justify  Laissez  Faire,  using  psy- 
chology and  theology  for  that  purpose,  the  trend  of 
legislation  was  such  that,  as  most  men  saw  it,  the  unre- 
stricted right  of  property  and  contract  needed  no  men- 
tion, while  with  others  nothing  seemed  less  self-evident 
than  the  free-trade  axiom  derived  from  it.  Senior,  for 
instance,  thought  the  legal  rights  "assumed  in  almost 
every  process  of  economic  reasoning"  as  a  "cornerstone 
of  .  .  .  exchange" ;  ^  but  Cairnes  in  his  "Essays  on 
Political  Economy,"  1873,  declared:  "The  maxim  of 
Laissez  Faire  has  no  scientific  basis  whatever,  but  is  at 
best  a  mere  handy  rule  of  practice  useful  perhaps, — but 
totally  destitute  of  all  scientific  authority."  "^  In  the 
face  of  such  an  utterance,  even  allowing  for  the  occasion 
on  which  it  was  made,  it  would  be  over-dogmatic  to 
declare  the  hedonistic  and  legal  premises  developed  during 
the  end  of  the  eighteenth  century  as  inseparable  and  inter- 
dependent, and  yet,  in  spite  of  the  growing  resort  to  cen- 
tral governments  for  the  regulation  of  economic  affairs, 
there  can  be  no  doubt  of  the  logical  importance  of  both 
kinds  of  suppositions. 

Indeed,  it  was  never  lost  sight  of  entirely  by  those 
most  consistent  in  their  thinking.  Even  when  not  prone 
to  theorizing  on  methods,  economists  made  it  their  busi- 
ness to  remind  us,  from  time  to  time,  of  what  was  basic 
to  their  argument.     Thus  to  illustrate  from  only  a  few 

•  Political  Economy,  Introduction. 

'  Essays  in  Political  Economy,   1873,  p.  244. 


148    THE  DEVELOPMENT  OF  ECONOMICS 

authorities:  Senior  in  his  article  contributed  to  the 
Encyclopedia  Metropolitana,  1836,  considered  the  "ele- 
mentary propositions'*  on  which  his  science  rested  to  be, 
first,  the  desire  for  maximum  wealth  to  be  procured  by  a 
minimum  of  sacrifice;  second,  a  population  limited  only 
by  moral  or  physical  evils,  or  by  the  fear  of  a  want  of 
necessities ;  third,  the  ability  of  the  agents  of  production 
to  increase  their  powers  indefinitely  by  using  their  prod- 
ucts for  further  production;  and  fourth,  the  law  of 
diminishing  returns  in  agriculture.  John  Stuart  Mill 
expressed  himself  with  sufficient  clearness  on  the  matter 
both  in  his  "Principles,"  where  older  ideas  are  sometimes 
restated,  and  in  his  "Logic,"  whose  general  argument  has 
already  been  presented.  But  perhaps  one  might  add  here 
this  one  sentence :  "The  psychological  law  mainl}'  con- 
cerned [in  economics]  is  the  familiar  one  that  a  greater 
gain  is  preferred  to  a  smaller  one."  .  .  .  "By  reasoning 
from  that  one  law  of  human  nature  ...  a  science  may 
be  constructed  which  has  received  the  name  of  political 
economy."  ^ 

Cairnes  believed  that  "our  premises  in  economics  come 
either  directly  from  our  consciousness  or  from  physical 
facts  easily  ascertainable."  ^  He  mentioned  the  desire 
for  wealth,  the  aversion  to  labor,  the  principle  of  maxi- 
mum gain  at  minimum  cost,  a  rational  mind  fit  to  judge 
upon  the  proper  relation  of  means  to  ends,  a  few  pro- 
pensities basic  to  any  law  of  population,  physical  quali- 
ties of  the  soil,  and  other  physical  factors  as  leading  ex- 
amples of  economic  premises.^"  That  is,  they  appeared 
to  be  partly  logical  devices,  and  partly  data  that  might 
figure  as  conclusions  after  an  investigation  of  the  respec- 
tive facts  had  been  completed. 

•  Ln^c,  Book  ITI.  ch.  9.  5  3. 

•  Charactor  and  I^oRical  Method  of  Political  Economy,  p.  220. 
'"  Ibidem,  pp.  33-4. 


UTILITARIANISM  149 

In  the  United  States  Francis  Bowen,  the  author  of 
^'Principles  of  Political  Economy,"  1859,  whose  readable 
style  and  broad  sympathies  with  practical  questions  gave 
him  a  good  name,  expressed  the  view :  "Political  economy 
begins  with  the  supposition  that  man  is  disposed  to 
accumulate  wealth  beyond  what  is  necessary  for  the 
immediate  gratification  of  his  wants,  and  that  this  dis- 
position, in  the  great  majority  of  cases,  is  unbounded; 
that  man's  inclination  to  labor  is  mainly  controlled  by 
this  desire;  and  that  he  is  constantly  competing  with  his 
fellows  in  this  attempt  to  gain  wealth;  and  that  he  is 
sagacious  enough  to  see  what  branches  of  industry  are 
most  profitable,  and  eager  enough  to  engage  in  them,  so 
that  competition  regularly  tends  to  bring  wages,  profits, 
and  prices  to  a  level."  ^^  A  similar,  but  more  concise, 
statement  came  from  Newcomb  in  1885,  at  the  beginning 
of  his  "Principles  of  Political  Economy,"  a  work  of 
unusual  merit  indeed.  We  are  told  there  that  the  funda- 
mental hypotheses  were:  "That  man  is  a  being  moved  to 
action  by  an  unlimited  series  of  desires ;  that  these  desires 
can  be  partially  satisfied  by  the  exertion  of  those  facul- 
ties bodily  and  mental,  with  which  the  Creator  has 
endowed  him;  that  he  is  a  reasonable  being  capable  of 
adapting  means  to  ends ;  and  that  in  consequence  of  being 
a  reasonable  being  he  will  exert  his  faculties  in  such  a 
way  as  to  secure  the  maximum  gratification  of  desires  with 
the  minimum  of  inconvenience  under  the  circumstances  in 
which  he  is  actually  placed."  ^^ 

For  Cossa,  the  Italian  economist,  the  premises  were 
first,  the  principle  of  greatest  gain  for  the  smallest  cost ; 
secondly,    the    law    of    diminishing    returns ;    third,    the 

"Pages. 
"  Page  23. 


150    THE  DEVELOPMENT  OF  ECONOMICS 

Malthusian  law,  and  fourth,  competition  based  on  private 
property  and  freedom  of  contract.^* 

Among  the  Germans  Wagner  wrote  in  his  "Principles 
of  Political  Economy,"  1892,  that  everything  hinged  on 
the  principles  of  maximum  gain  and  minimum  cost,  of 
equal  technical  or  other  knowledge  pertaining  to  the 
supply  and  demand  of  goods,  and  on  a  certain  distribu- 
tion of  legal  rights  for  using  our  instincts  and  reason.^* 
Dietzel,  his  collaborator  in  the  companion  volume  on 
"Theoretical  Social  Economics,"  1892,  conceded  that 
economics  could  not  be  a  science  if  certain  premises  were 
removed,  and  forthwith  grouped  them  under  two  head- 
ings, viz.,  the  first  as  psychological  in  their  nature,  the 
maxim  of  an  "economic  man,"  of  least  cost,  and  of  equal 
knowledge  about  the  facts  of  the  markets  being  instances ; 
and  secondly,  those  sociological  in  nature,  the  choice 
between  a  collectivistic  or  an  individualistic  order  of 
society  standing  out  as  all-important.  His  second  class 
of  premises  therefore  became  admittedly  mere  working 
devices,  ceased  to  be  what  they  had  been  for  the  older 
Utilitarians,  and  indicated  interestingly  the  Historical 
leaning  which  motivated  so  many  Socialists  of  the  Chair.^^ 
•  The  tentative  value  of  premises,  lastly,  was  also  recog- 
nized by  philosophers  who  as  logicians  had  a  peculiar 
interest  in  them.  And  so  it  will  not  be  amiss  to  cite 
Wundt  whose  "Logic"  dealt  passim  with  necessary 
assumptions.  They  were  held  to  be:  Maximum  con- 
sumption, respectively,  production  as  the  highest  aim  of 
men  ;  equal  understanding  among  men  of  what  was  best  for 
them,  or  at  least  of  the  means  for  gratification ;  and  free- 
trade  "in  the  absence  of  economic  privileges."  ^'^     Con- 

"  CoRsa,   L.     Introduction  to  the  Study  of  Political  Economy   (transL 
from  the  Italian  hy  Dyor,  L..  1803),  pp.  74-5. 

"Lehr-  und  Handbuch,  vol.  I,  3.  edit.,  pp.  175-85. 
'"  Thi'oreti.schc    Soziahikononiik,    1805,    pp.    78-92. 
"  Logik,  2.  (Kiit.,  vol.  2,  p.  509. 


UTILITARIANISM  151 

sidering  the  reputation  of  the  author,  and  the  place 
of  this  statement  (namely  after  many  pages  on  the 
methodology  of  social  science  and  more  particularly  of 
economics),  it  is  not  without  significance. 

The  need  of  premises  was  recognized  the  more  clearly, 
the  deeper  men's  comprehension  of  the  rigid  deductive 
method  into  which  economics  had  fallen  after  1800.  The 
abstractions  of  Fichte  in  his  "Closed  Commercial  State" 
of  1800,  of  Ricardo  in  1817,  of  Thuenen  in  his  "Isolated 
State,"  1826,  of  Cournot  in  his  "Researches  into  the 
Mathematical  Principles  of  the  Theory  of  Wealth,"  1838, 
and  of  Gossen,  whose  "Development  of  the  Laws  of 
(Human)  Commerce,"  1855,  marks  an  epoch  in  economic 
thought  .  .  .  these  bold  attempts  at  attaining  precision 
were  bound  to  arouse  interest  in  suitable  axioms. 
L'tilitarian  economics  in  this  respect  not  only  began  a 
task,  but  also  completed  it.  If  freedom  of  vocation  and 
of  residence  have  recently  been  added  as  parts  of  the 
general  assumption,  this  is  of  no  great  import.  The  act 
of  commitment  lay  in  the  acknowledgment  of  human 
traits  and  of  socially  evolved  liberties  for  individual 
initiative,  without  which  political  economy  might  be  a 
business  or  an  art,  but  not  a  science  delving  for  laws  of 
relations. 

Structural  Characteristics. — Yet,  that  inconsistencies 
abounded  and  the  classification  of  data  was  by  no  means 
the  same  for  all  students  of  the  subject,  may  be  seen  at 
a  glance  from  Table  Two.  Structurally  economics  owes 
a  great  deal  to  J.  B.  Say,  whose  work  was  discussed  pre- 
viously, and  to  K.  H.  Rau.  It  was  not  likely  that 
economists  thereafter  should  be  as  indifferent  to  logical 
divisions  as  Smith  had  been.  Ricardo  on  his  part  had 
provided  a  viewpoint  for  a  treatment  of  economic  facts 
coming  near  to  the  procedure  of  mathematicians.    For  as 


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154     THE  DEVELOPMENT  OF  ECONOMICS 

soon  as  economics  was  definitely  understood  as  a  study  of 
principles  of  pricing  and  distribution,  the  case  of  produc- 
tion being  one  of  values  and  not  one  of  volume,  a  certain 
sequence  of  arguments  would  suggest  itself.  In  most  in- 
stances this  appears  from  the  treatises  tabulated.  But  the 
agreement  assuredly  is  much  less  than  one  might  have  ex- 
pected, the  cause  being  not  merely  the  nature  of  the  mate- 
rial which  left  much  room  for  individual  stress  and 
strictures,  but  also  the  confusion  of  competitive  with 
non-competitive  concepts,  as  a  result  of  which  main 
divisions  changed  order,  or  special  minor  topics  slipped 
into  places  where  logic  could  not  have  defended  it.  Thus, 
even  among  Utilitarians  as  distinct  from  the  Marginists, 
there  was  little  agreement  as  to  the  relative  position  of 
Production  and  Price,  not  quite  three-fourths  preferring 
this  order,  while  the  rest  reversed  it  in  perfectly  good 
faith.  J.  S.  Mill  characteristically  begins  with  Produc- 
tion, then  takes  up  Distribution,  and  then  Exchange,  this 
latter  containing  his  views  on  value  and  price,  while 
Consumption  is  held  not  to  form  part  of  economics. 
Ricardo  of  course  had  no  direct  interest  in  production 
or  consumption,  partly  because  he  was  guided  by  his 
criticism  of  Smith,  and  partly,  no  doubt,  because  of  his 
general  outlook.  As  will  appear  in  a  moment  the  defini- 
tions and  laws  derived  largely  from  them  prompted  the 
Utilitarians  to  arrange  their  material  differently  from 
what  they  might  have  done  had  they  clung  steadfastly 
to  their  psychological  theories.  And  this  is  perhaps  the 
reason  too  why  Consumption  was  treated  so  step-sisterly, 
driven  from  pillar  to  post,  now  called  by  one  name  and 
now  by  another,  proving  for  some  an  invaluable  aid  in 
straightening  out  their  affairs,  but  for  others  merely  an 
inconvenient  claimant  whose  real  status  could  not  be  de- 
fined owing  to  irreconcilable  viewpoints  and  aims^ 


UTILITARIANISM  155 

So  the  outward  form  of  both  Marginal  and  Utilitarian 
economics  varied  considerably.  Exchange  dealt  with  many 
matters  pertaining  neither  to  production  nor  to  pricing. 
Production  now  had  one  caption,  now  two.  Distribution 
depended  on  laws  not  operative  in  Production,  yet  was 
often  wrenched  from  Value  or  Exchange  where  prices 
of  services  no  less  than  those  of  commodities  were  sup- 
posed to  be  explained.  The  question  was :  How  could 
uniformity  be  introduced  without  reducing  economics  to 
a  description  of  one  single  regime  of  perhaps  purely 
national  significance .''  ^"^ 

Economics  and  Ethics. — The  situation  was  complicated 
by  the  fact  that  some  Utilitarians  considered  ethics  an 
integral  part  of  their  work  and  therefore  offered  advice 
to  governments  in  the  belief  that  their  science  could  not 
go  wrong.  From  the  start  this  relation  of  the  Is  to  the 
Ought  had  figured  in  economic  discussion.  The  Physio- 
crats like  Smith  had  pointed  to  certain  corollaries  as  suit- 
able means  for  new  policies  and  the  reconstruction  of  so- 
ciety. Their  conclusions  were  taken  seriously  and  tried 
out  practically  because  the  age  was  ready  for  a  change. 
The  abstract  question  as  to  how  science  can  become  poli- 
tics, or  a  moral  ideal  spring  logically  from  a  description 
of  economic  processes,  was  not  yet  formulated ;  nor  could 
it  have  vexed  people  who  talked  continually  of  a  law  of 
nature  which  itself  prescribed  the  steps  men  should  take 
to  prosper. 

From  the  Utilitarian  standpoint,  however,  the  answer 
might  be  given  in  two  different  ways.  Namely,  it  might 
appear  as  if,  since  pleasure  was  virtue  and  happiness  at 
the  same  time,  a  moral  issue  was  altogether  impossible, 

"  On  the  early  history  of  structural  features  in  economics  see,  e.  g., 
Cannan,  E.  A  History  of  Theories  of  Production  and  Distribution ;  or 
Cossa,  E.     Del  Consumo  delle  Richezze,  1898. 


156     THE  DEVELOPMENT  OF  ECONOMICS 

the  real  difficulty  being  merely  the  discovery  of  the 
cheapest  means  by  which  each  could  get  his  pleasure  so 
that  the  "greatest  happiness  of  the  greatest  number" 
was  achieved.  Or  on  the  other  hand,  followers  of  the 
Utilitarian  economics  who  accepted  its  psychology  and 
general  method,  as  laid  down  notably  by  J.  S.  Mill,  might 
nonetheless  espouse  a  non-utilitarian  ethics  that  had  noth- 
ing to  do  with  economics.  Furthermore,  a  question  might 
of  course  be  raised  as  to  the  exact  meaning  of  the  phrase 
by  which  the  science  was  designated ;  in  which  case  the 
dissension  among  economists  need  not  arise  from  any 
particular  notion  of  ethics,  but  rather  from  a  desire  to 
state  the  case  of  art  versus  science.  What  was  "political 
economy,"  a  science  only  or  also  an  art?  Or  should 
applications  of  the  science  pass  under  a  different  title, 
supposing  they  were  logically  admissable? 

In  a  word,  the  Utilitarians  were  the  first — though  by 
no  means  the  last ! — to  wrestle  with  the  terms  science, 
art,  and  ethics.  Some  were  out  and  out  hedonists  and 
saw  in  morality  no  more  than  a  convenient  term  for  justi- 
fying an  individualistic  standpoint.  Others  never  shared 
Bentham's  opinion,  but  on  the  contrary  preached  a  theory 
of  ethics  either  in  the  style  of  eighteenth  century  intui- 
tionists,  or  in  accord  with  the  transcendental  viewpoint 
which  after  1830  gained  an  appreciable  following  even 
in  England.  And  as  for  the  continental  economists  it 
goes  without  saying  that  they  never  presumed  to  base 
their  ethics  on  a  pain-pleasure  calculus.  Rationalism 
precluded  such  a  step  in  the  earlier  days,  and  later  on  the 
Kantian  category,  in  one  way  or  another,  fastened  itself 
upon  the  great  majority  of  writers.  This  is  shown  not 
only  by  flowing  passages  on  the  high  mission  of  eco- 
nomics as  a  discipline  true  to  the  best  dictates  of  ethics — 


UTILITARIANISM  157 

as  if  social  science  needed  this  support — ^but  also  by  the 
opposition  of  the  Historical  group,  for  one  thing,  to 
Smithianism  or  Ricardianism,  and  for  another  thing, 
to  any  injection  of  moral  issues  into  economics  proper. 
Indeed,  going  over  the  economic  literature  one  cannot  help 
but  be  impressed  with  the  gradual  ascendancy  of  the  non- 
ethical  economics,  that  is  of  the  belief  in  economics  as  a 
science  not  simply  distinct  from  ethics,  but  in  its  con- 
clusions probably  incompatible  with  any  theory  of 
ethics ! 

Among  those  who  did  not  clearly  decide  between  politi- 
cal economy  as  an  art  and  as  a  science  we  must  place 
Smith  in  spite  of  his  break  with  the  old  conception  of 
"Moral  Philosophy,"  but  also  some  who  were  not  of  his 
age,  yet  wished  economics  to  have  a  practical,  semi-moral 
mission.  Dugald  Stewart,  for  instance,  in  his  "Lectures 
on  Political  Economy"  (probably  penned  between  1790 
and  1805)  defined  political  economy  as  "those  specula- 
tions which  have  for  their  object  the  happiness  and  im- 
provement of  political  society,  or  in  other  words,  which 
have  for  their  object  the  great  and  ultimate  ends  from 
which  political  regulations  derive  all  their  value.  .  .  ."  ^^ 
The  "prevailing  springs  of  human  action"  are  to  serve  as 
a  guide  in  this  endeavor,  and  Population,  Wealth,  includ- 
ing Trade  and  Taxes,  Pauperism,  and  Education  of  the 
Lower  Orders  figure  as  the  main  divisions  of  his  survey. 
Bentham,  in  his  "Manual  of  Political  Economy,"  1793, 
declared :  "Political  Economy  is  at  once  a  science  and 
an  art."  ^^  Non-interference  was  to  be  the  general 
principle,  as  was  shown  particularly  in  his  "Defence  of 
Usury,"  1787.  Yet  there  were  cases  where  "Agenda" 
seemed  advisable,  or  at  any  rate  excusable,  and  some  of 

"Collected  Works,  1802.  Introduction,  and  vols.  8  and  9. 
"  Opening  sentence  of  Manual. 


158     THE  DEVELOPMENT  OF  ECONOMICS 

these  were  mentioned  as  means  toward  the  attainment  of 
happiness  for  the  greatest  number.^*^  Ethics  could  not 
form  a  distinct  subject  for  the  examination  of  economists, 
since  on  his  hedonistic  premise  the  good  and  the  valuable 
for  exchange  coincided  completely. 

Chalmers,  whose  "On  Political  Economy  in  Connection 
with  the  Moral  State  and  Moral  Prospects,"  1832,  had 
a  special  mission  aside  from  influencing  the  younger  Mill, 
wrote  in  his  Preface:  "Political  Economy  aims  at  the 
diffusion  of  sufficiency  and  comfort  throughout  the  mass 
of  the  population  by  a  multiplication  or  enlargement  of 
the  outward  means  and  materials  of  human  enjoyment,"  ^^ 
religious  education  becoming  important  for  this  reason. 
McCulloch  thought  that  economics  included  necessarily 
a  "discussion  of  the  means  whereby  labor  may  be  rendered 
most  efficient,  or  whereby  the  greatest  amount  of  neces- 
sary, useful,  and  desirable  product  may  be  obtained  with 
the  least  possible  quantity  of  labor,"  ^^  an  opinion  that 
endowed  with  virtue  what  ordinarily  passed  as  plain 
greed. 

If  we  turn  to  France  and  Germany  we  shall  find  the 
friends  of  an  independent,  non-utilitarian  ethics  laboring 
far  a  reconciliation  of  the  Is  and  the  Ought  in  social  life. 
J.  B.  Say,  of  course,  had  set  a  precedent  by  his  cate- 
gorical exclusion  of  morals  from  economy,  but  many  later 
writers,  even  when  acknowledging  the  superiority  of  Say's 
presentation,  preferred  to  be  illogical  rather  than  un- 
ethical. Thus  Bastiat,  Baudrillart,^^  and  Cauwes  ^* 
betray    a    strong    undercurrent    of    moralism;    while    in 

'»  Manual,  ch.  1. 

'1  Pages  iii-v. 

"  Principles  of  Politieal  Economy,  Part  II,  §  1.  See  also  Scrope,  G.  P. 
Principles  of  Political  Economy,   1833,   p.   35. 

"  Baudrillart,  M.  II.  Des  Rapports  de  la  Morale  et  de  I'Economie 
Politique,  1860. 

"Cours  d'Economie  Politique,  3.  edit.,  1893,  vol.  1,  pp.  8-12.  See 
also  Block,  M.     Lcs  Progrfes  de  la  Science  Economique,  1890,  vol.  1,  p.  35. 


UTILITARIANISM  159 

Germany  the  Socialists  of  the  Chair  felt  constrained  per- 
haps as  much  by  circumstances  as  by  theoretical  aims 
to  wed  economics  to  ethics.  Wagner  himself,  as  editor 
of  the  encyclopedic  "Manual,"  exerted  considerable  in- 
fluence in  this  direction,  not  only  in  Germany,  but  else- 
where.^^ Thus  it  is  not  at  all  strange  that  one  should 
read  in  Schoenberg's  "Manual" :  Economics  does  not  pri- 
marily ask  "whether  the  greatest  possible  amount  of 
wealth  is  produced,  but  rather  how  men  live,  how  far 
through  their  economic  activity  the  moral  aims  of  life 
are  fulfilled,  and  how  far  the  demands  of  justice,  hu- 
manity, and  morality  are  satisfied."  ^^  The  Historical 
movement  had  tended  toward  such  a  confession  on  the 
part  of  Utilitarian  economists.  It  appeared  commend- 
able to  fuse  ethics  with  economics,  even  if  Ricardianism 
was  otherwise  retained  and  the  metaphysical  nature  of 
moral  questions  granted  out  of  hand. 

However,  at  its  best  and  in  its  purest  form  Utilitarian 
economics  was  stripped  of  moral  valuations.  The  con- 
scious and  common  aim  of  students  was  to  separate  the 
Ought  from  the  Is,  in  the  hope  that  economics  might  thus 
gain  in  scientific  tone.  Malthus  in  his  "Principles  of 
Political  Economy,"  for  instance,  protested  against 
moralizing  even  though  "the  science  of  political  economy 
is  essentially  practical,  and  applicable  to  the  common 
business  of  human  life."  ~^  Senior  in  his  article  on 
"Political  Economy,"  1836,  balanced  the  in-  and  ex-clu- 
sion  of  moral  issues  rather  cautiously,  not  to  say  with  in- 
decision, but  perhaps  one  should  take  most  seriously  his 
evident  predilection  for  rigid  thinking  and  abstraction. 
Thus  he  wrote :     "The  questions,  To  what  extent  and 

"Lehr-  und  Handbuch,  edit,  of  1892,  vol.  1,  pp.   144-45. 
"  Handbuch,   edit,   of   1890,   vol.   1,    |    9.      See  also   Cohn,   G.      Grund- 
legung  der  Nationalokonomie,  1885,  vol.  1,  pp.  74-77. 
"  Edition  of  1821,  p.  9. 


160     THE  DEVELOPMENT  OF  ECONOMICS 

under  what  circumstances  the  possession  of  wealth  is, 
on  the  whole,  beneficial  or  injurious  to  its  possessor, 
or  to  .  .  .  society?  And  what  are  the  means  by  which 
any  given  country  can  facilitate  such  a  distribution? 
...  all  these  are  questions  of  great  interest  and  diffi- 
culty, but  no  more  form  part  of  the  science  of  Political 
Economy  in  the  sense  in  which  we  use  that  term,  than 
Navigation  forms  part  of  the  Science  of  Astronomy."  ^* 

In  a  similar  vein  spoke  Whately,^^  James  and  J.  S. 
Mill,  Donisthorpe,  Caimes,  Bagehot,  and  Keynes.  To 
quote  only  a  few  words  from  Donisthorpe,  a  writer 
less  widely  known  than  the  others  in  spite  of  his  attempt 
at  an  exact  science:  Plutology  cares  nothing  "for  the 
practical  rules  which  may  be  deduced  from  its  doctrines 
.  .  .  ;  still  less  for  the  mode  in  which  wealth  is  [that  is, 
ought  to  be]  distributed  amongst  its  proprietors." 
"Plutology  investigates  the  laws  of  value.  That  is  all."  ^^ 
Thus  he  differed  from  Hearn  whose  work  he  otherwise 
deeply  admired. 

In  France  the  non-ethical  attitude  is  represented  by 
such  different  thinkers  as  Cournot,^^  Courcelle-Seneuil,^^ 
Cherbuliez  ^^  (a  Swiss),  and  much  later  Colson,  the  author 
of  the  "Course  of  Political  Economy,"  1901-.^*  As  in 
Germany,  so  here  the  practical  value  for  the  statesmen  of 
many  economic  theorems  is  recognized,  but  without  any 
willingness  to  identify  statesmanship  with  ethics !  The 
belief  in  a  science  of  economics  was  stronger  than  the 
interest  in  the  foundations  of  moral  judgments.     An  un- 

"  Introduction. 

"  Lecture  on  Political  Economy,  1831,  p.  50. 

'"  Principles  of  Plutology,  187(),  pp.  2-3  ;  a  work  influenced  by  Ilearn, 
W.  E.,  the  author  of  Plutology,  18(;4. 

"  Resoarchcs  into  tho  Matheinaticnl  Principles  of  the  Theory  of 
Wealth.  1838,  translated  by  Hacon,  N.  Y.,  1897,  p.  16. 

"  Trait6  Theoretique  et  Pratique  d'Kconomie  Politique,  1858,  vol.  1, 
p.  8. 

"  Precis  de  la  Science  Economique,  1862,  vol.  1,  pp.  6-7. 

•*  Cours  d'Economie  Politique,  2.  edit..  Book  I,  ch.  1. 


UTILITARIANISM  161 

equivocal  separation  of  the  two  fields  of  study  seemed  most 
natural  or  least  fraught  with  disagreeable  consequences 
for  economics.  This  view  was  of  long  standing  and  widely 
prevalent.  We  find  it  in  the  United  States,  too,  where  a 
number  of  scholars  gave  currency  to  European  economic 
thought.  F.  A.  Walker,  whose  "Political  Economy," 
1887,  is  a  milestone  in  the  development  of  American 
economics,  may  be  quoted  as  representative  of  other  men, 
though  it  would  be  wrong  to  suppose  that  the  a-moral 
view  won  the  day  easily.  Quite  the  contrary  is  true. 
We  read:  "The  economist  as  such  has  nothing  to  do 
with  the  question  whether  existing  institutions  or  laws 
or  customs  are  right  or  wrong."  .  .  .  "The  writer  on 
ethics  who  deems  the  greatest  good  of  the  greatest  num- 
ber the  ultimate  rule  of  right  may  indeed  make  excursions 
into  economics,  in  order  to  judge  of  the  moral  quality  of 
an  act  or  a  system,  by  its  effects  on  the  production  and 
distribution  of  wealth ;  but  the  economist  on  his  part  has 
no  occasion  to  cross  the  boundary  line."  ^^  In  general, 
economists  held  this  position  the  more  outspokenly,  the 
more  logical  their  reasoning  from  the  premises  given, 
the  more  determined  their  eff'ort  to  build  on  the  definitions 
fundamental  to  their  science. 

Definitions. — Definitions  and  laws  were  laid  down  more 
or  less  exactly  soon  after  Smith  had  published  his 
"Wealth  of  Nations,"  but  it  was  particularly  the  psychol- 
ogy and  methodology  of  Utilitarian  economics  that 
brought  a  high  degree  of  precision  and  agreement  into 
the  principal  works  of  the  time,  A  nomenclature  devel- 
oped which  still  constitutes  part  of  the  economist's  work- 
ing apparatus.  Premises  were  carefully  consulted  in 
defining  such  fundamentals  as  utility,  value,  wealth,  capi- 
tal,   production,    consumption,   labor,    etc.      The   search 

"  Pages  20-7. 


162    THE  DEVELOPMENT  OF  ECONOMICS 

for  principles,  that  is  for  constant  relations  between  facts 
which  should  prove  not  merely  the  continuity  from  an 
anorganic  to  an  organic  world,  but  also  furnish  data 
for  reformers  and  legislators,  included  studies  in  logic, 
implicitly  or  expressedly.  Among  all  classes  of  thinkers 
the  deductive  method  was  favored  either  in  practice  or 
theoretically.  J.  S.  Mill's  procedure  is  representative 
of  that  of  the  great  majority,  even  though  they  could 
not  claim  his  mastery  of  the  subject.  What  he  him- 
self had  hoped  from  an  inductively  conducted  examina- 
tion into  social  processes  was  overlooked,  but  the  route 
by  which  he  sought  a  formulation  of  laws,  to  be  valid 
for  many  nations  and  for  long  periods  of  time,  led 
others  to  like  conclusions.  Dissent  was  rare  at  first. 
Only  as  a  result  of  the  steadily  gaining  long-time  view 
of  social  institutions  was  the  prestige  of  the  Utilitarians 
dimmed,  and  then  interest  centered  in  two  different  prob- 
lems, neither  one  of  which  had  ever  been  given  much 
thought. 

For  in  Utilitarian  economics  the  objective  and  static 
version  was  the  only  legitimate  one.  The  world  was  taken 
to  be  real,  and  the  usefulness  of  things  as  inherent  in 
them,  certain  reservations  notwithstanding.  Utility  was 
of  matter  as  well  as  for  men.  Cost  was  outgo  of  mate- 
rials and  not  primarily  a  pain,  though  the  Benthamites 
knew  of  the  latter.  Income  referred  to  goods  and  not 
to  legal  rights.  Measurement  was  by  a  standard  acces- 
sible to  all,  namely,  by  stuff  or  time,  labor  being  back 
of  both.  In  a  word,  though  individualism  had  triumphed, 
there  were  echoes  of  the  Physiocratic  chant  in  praise  of 
a  beneficent  nature  and  the  perfectibility  of  Man. 

The  foundation  rock  of  course  was  the  concept  of 
value,  itself  analyzable  into  the  elements  of  utility, 
scarcity,  and  labor.     Without  labor,  it  had  at  the  begin- 


UTILITARIANISM  163 

ning  been  preached,  things  could  not  acquire  value,  a 
view,  however,  which  was  gradually  dispelled  and  replaced 
by  the  more  logical  one  that  what  counts  is  not  a  physical 
change  in  external  objects,  but  an  attitude  on  the  part 
of  human  beings.  Scarcity  therefore  was  found  more 
decisive  than  energy  previously  spent,  and  this  could 
mean  nothing  less  than  establishing  a  ratio  between  wants 
of  people  and  the  supplies  on  hand.  That  things  useful 
would  become  the  more  valuable  the  less  there  was  of 
them,  was  consequently  understood  at  an  early  date,  the 
comments  of  the  Earl  of  Lauderdale  on  this  subject  being 
the  prototype  of  most  things  said  since.  A  paradox  thus 
hove  into  view  which  it  might  take  time  to  explain,  but 
the  reality  of  which  none  could  deny.  And  as  to  this 
question  of  utility  itself,  the  first  step  was  a  ruthless 
overriding  of  moral  conceptions.  In  discussing  values 
the  problem  of  ultimate  values  was  to  be  left  out.  It  was 
nobody^s  business  whether  values  satisfied  theological  or 
ethical  norms  or  not.  For  the  Utilitarians  in  the  narrower 
sense  economic  and  "higher"  value  was  one;  for  others 
the  stress  was  on  a  separation  that  should  leave  science 
untrammeled.  Hence  things  were  useful  if  they  served 
to  satisfy  wants.  The  capacity  of  anything,  whether 
tangible  or  not,  to  gratify  an}^  want  whatsoever,  was  the 
proof  of  its  being  useful.  As  J.  S.  Mill  observed  in  his 
"Principles  of  Political  Economy,"  1848:  "Political 
Economy  has  nothing  to  do  with  the  comparative  esti- 
mation of  different  uses  in  the  judgment  of  a  philosopher 
or  of  a  moralist.  The  use  of  a  thing  .  .  .  means  its 
capacity  to  satisfy  a  desire,  or  serve  a  purpose."  ^^ 

Now,  given  utility  and  scarcity,  or  simply  labor 
embodied  in  an  object,  or  our  right  to  exchange  such 
objects,  the  definition  of  value  is   easy.      Namely,  it  is 

"Book  III,  ch.  1,  §  2. 


164    THE  DEVELOPMENT  OF  ECONOMICS 

"the  command  which  the  possession  of  a  thing  gives  over 
purchaseable  commodities  in  general."  ^"^  Value  repre- 
sents a  relation  between  a  person  and  something  external 
to  him,  but  it  also  expresses  a  relation  between  two  or 
more  articles  measurable  by  the  rate  at  which  they  are 
exchanged.  Either  one  may  serve  as  a  unit  for  measure- 
ment. The  customary  one  is  a  piece  of  currency,  a 
standard  legally  defined,  in  which  case  we  speak  of  money 
and  price  respectively.  But  it  is  not  necessary  that  the 
exchange  ratio  be  so  reckoned.  In  barter  the  exchange 
is  necessarily  at  a  certain  rate  too ;  and  here  the  value 
of  the  things  exchanged  is  revealed.  The  market  ratio 
increasingly  received  people's  attention,  the  idea  of  a 
"natural"  value  being  dropped  as  of  no  bearing  on  the 
main  subject.  Besides,  there  was  an  ethical  element  in 
the  "natural'*  price  that  Utilitarianism  could  not  approve 
of  without  jeopardizing  its  position. 

However,  it  was  granted  that  individual  and  social 
viewpoints  might  go  far  apart,  and  so  from  Lauderdale 
up  to  the  present  the  definition  of  wealth  has  proven  an 
apple  of  discord.  For,  strictly  speaking,  wealth  had  to 
be  defined  as  "everything  which  has  a  power  of  purchas- 
ing"; but  though  this  agreed  well  with  the  theory  of  an 
"economic  man"  and  the  delimitation  of  economics  in 
utilitarian  style,  it  occasioned  much  speculation  as  to  the 
relation  of  national  to  individual  wealth.  The  difference 
was  soon  noticed  and  courageously  expounded.  The  Earl 
of  Lauderdale  once  more  set  an  example.  John  Rae  in 
1834  in  America,  and  McCulloch  and  Torrens  in  England 
made  much  of  the  distinction,  the  hope  being  now  to  give 
economics  a  moral  setting,  now  to  accentuate  the  scien- 

"  II)idoni.  Spo  also  I'antak'oni,  M.  I'rinciples  of  Pure  Economics 
(translated  from  the  Itiilian  l)y  Bruco,  T.  B.,  1898),  ch.  4.  For  a  classi- 
fication of  definitions  of  price  sec  Fetter's  article  in  American  Economic 
licvicWj  vol.  II,   1912. 


UTILITARIANISM  165 

tific  character  of  a  discipline  newly  arisen.  Indeed,  the 
competitive  concept  gained  the  upper  hand.  Men  like 
Say  in  France,  Ricardo  in  England,  and  Hermann  in 
Germany  lent  prestige  to  the  terminology  evolved  from 
eighteenth  century  psychology  and  hedonism.  The  sig- 
nificance of  rights  was  opposed  to  the  older  notion  of 
things  for  use.  Classes  of  wealth  were  enumerated  and 
the  differences  between  land  and  non-land  wealth,  or 
between  producible  and  reproducible,  or  between  durable 
and  ephemeral,  forms  of  wealth  pointed  out.  But  such 
facts,  though  significant  for  a  national  view  of  wealth, 
could  not  blind  men  to  the  entrepreneur  background  of 
their  definitions. 

The  definition  of  capital  changed  also  by  degrees.  At 
first  it  had  meant  "stock"  in  hand,  that  is,  concrete 
things  and  notably  foods  for  the  laborer,  the  manufac- 
turer being  supposed  to  decide  how  much  should  be 
"saved"  and  how  much  put  to  personal  uses.  The  "stock" 
was  a  circulating  item.  It  was  the  surplus  of  the 
Physiocrats.  The  aim  was  to  exhibit  to  the  layman's 
glance  the  mechanism,  the  law  of  nature,  by  which  all 
classes  were  fed  and  the  cycle  of  production  and  consump- 
tion might  go  on  forever  if  the  surplus  were  properly 
handled — taxes  included.  Hence  the  terms  circulating 
and  fixed  capital.  Smith  having  defined  the  latter  as  stock 
"employed  in  the  improvement  of  land,  in  the  purchase  of 
useful  machines  and  instruments  of  trade,  or  in  such-like 
things  as  yield  a  revenue  or  profit  without  changing 
masters,  or  circulating  further."  ^^  Whether  an  article 
therefore  changed  hands  or  not  in  the  course  of  business 
for  profit  was  an  important  question  to  Smith.  But  from 
Ricardo  on,  while  capital  is  more  emphatically  than  ever 
a  source  of  income  irrespective  of  its   form  or  lack  of 

"  Wealth  of  Nations,  Book  II,  ch.  1. 


166    THE  DEVELOPMENT  OF  ECONOMICS 

definite  form,  circulating  capital  consists  of  rapidly 
perishable  items,  while  fixed  capital  referred  to  items  not 
subject  to  quick  deterioration  or  wear.^^  The  problem 
of  expenses  as  against  labor-costs  had  driven  Ricardo 
to  this  new  distinction,  and  of  course  it  was  no  obstacle 
to  his  main  contention  that  capital  was  an  individualistic 
concept.  It  was  agreed  that  capital  might  or  might  not 
be  the  result  of  labor,  or  of  savings,  and  that  in  one  sense 
the  matter  was  inconsequential  so  long  as  the  destination 
of  this  surplus  was  understood.  In  other  words,  as  the 
wages-fund  controversy  showed  clearly,  capital  was 
pictured  as  a  fund  of  valties  convertible  at  will  into  any 
number  of  things  either  for  the  use  of  personal  servants 
or  of  day-laborers,  or  of  farm-hands.  But  since  either 
possibility  had  to  be  reckoned  with  the  ratio  of  capital 
to  laborers  was  important.  Here  therefore  the  collecti- 
vistic  standpoint  crossed  the  competitive,  and  thanks 
to  the  labors  of  Hermann,  Rodbertus,  and  later  on 
A.  Wagner  the  rights-aspects  became  familiar  to  all. 

Production  and  consumption  too  were  defined  both 
from  the  social  and  from  the  individual  standpoint, 
although  in  harmony  with  the  premises  the  latter  tended 
to  predominate.  The  original  aim  was  of  course  the 
creation  of  utilities.  It  was  granted  from  the  start  that 
man  could  not  create  matter,  but  only  transform  one  kind 
into  another  for  his  particular  purposes.  The  whole 
analysis  of  progress  as  the  Naturalists  offered  it  veered 
about  this  relation  between  man  and  materials.  Even 
J.  S.  Mill  opens  his  treatise  with  this  sentence:  "The 
requisites  of  production  are  two :  labor  and  appropriate 
natural  objects";  and  he  continues  telling  us  about  the 
differences  between  creating  and  converting  things.  So 
it  is  not  to  be  wondered  at  that  the  physical  aspects  of 

"  Ricardo,  D.     Principles  of  Political  Economy,  ch.  1,   §  4. 


UTILITARIANISM  167 

production  should  preoccupy  the  Utilitarians  to  the  last. 
However,  the  possibility  of  "producing"  without  turning 
a  hand,  without  ardent  labors  or  the  employment  of  large 
funds  was  impressed  upon  people  more  and  more.  It 
turned  out  ere  long,  as  might  have  been  predicted  from 
the  premises,  that  to  produce  is  to  render  a  service,  and 
that  the  evidence  for  this  latter  act  was  price  or  appre- 
ciation itself,  not  the  technique  of  production  which  to 
society  at  large  is  so  fundamental.  Production  therefore 
ceased  to  be  associated  with  the  handling  of  concrete 
objects.  Whether  value  took  embodiment  in  tangibles 
or  not,  it  was  conceded  that  a  productive  act  might  have 
occurred. 

Consumption. — But  conversely  it  could  not  then  be 
maintained  that  consumption  necessarily  involved  a 
destruction  of  things,  nor  even  that  use  is  the  sole  test 
in  the  definition.  Consumption,  it  soon  appeared,  might 
mean  either  use  with  or  without  either  physical  or  value 
changes,  or  either  one  of  the  latter  two  without  accom- 
panying use.  As  to  which  was  the  surer  method  of  find- 
ing out,  not  all  could  agree.  In  general,  there  arose  two 
arguments,  one  emphasizing  the  use  of  goods,  and  the 
second  the  loss  of  values  as  the  quintessence  of  consump- 
tion. The  former  suited  the  majority  of  economists, 
though  even  here  dissension  arose  as  to  whether  use  had 
to  result  in  physical  or  value  change  or  not,  in  order  to 
signify  consumption.  McCulloch  in  1825  wrote:  "Anni- 
hilation of  those  qualities  which  render  commodities  use- 
ful and  desirable"  ^^  is  the  natural  result  of  consumption. 
Senior  expressed  himself  similarly,*^  and  so  D.  Raymond, 
E.  P.  Smith,  and  F.  Walker  in  America.  Raymond,  how- 
ever, marred  his  argument  by  adding:   "A  service  of  plate 

*"  Principles  of  Political  Economy.  1825.  Part  IV. 
"  Political  Economy,  edit,  of  1858,  pp.  83-4. 


168    THE  DEVELOPMENT  OF  ECONOMICS 

may  last  for  ages,  although  it  is  said  to  be  consumed 
when  purchased  by  him  who  designs  to  use  it."  ^^  E.  P. 
Smith,  whose  "Manual  of  Political  Economy,"  1853, 
shows  the  influence  of  H.  C.  Carey,  wrote :  "The  consump- 
tion of  a  product  is  nothing  else  than  its  passage  from 
a  state  of  inertness  to  one  of  activity,  as  from  the  inor- 
ganic or  mineral  region  to  the  vegetable  or  vital."  This 
of  course  harmonized  well  with  the  sociological  standpoint 
of  his  master,  but  for  the  Utilitarian  system  it  had  even 
less  weight  than  F.  Walker's  definition  of  consumption  as 
the  "use  made  of  wealth"  which  "does  not  necessarily 
imply  the  .  .  .  exhaustion  of  the  value  which  had  at  some 
time  been  imparted  to"  ^^  such  wealth. 

And  so  one  might  cite  also  the  German  economists 
Hermann,^"*  Schulze,^^  Schaffle,"*^  Schoenberg,^"^  etc.  To 
them  use  was  the  decisive  feature,  not  de-valuation.  In 
one  connection  they  contrasted  demand  and  use  with 
supply  through  production,  in  another  they  denied  the 
shrinkage  of  supplies  irrespective  of  withdrawals  from 
the  market.  Schiiffle  was  influenced  by  his  sociological 
bias ;  some  of  the  otliers  by  the  Historical,  i.  e.,  collec- 
tivistic  viewpoint.  In  France  too  writers  like  Cauwes,^^ 
Block,^^  Colson,^*^  Blanchard,^^  Leroy  Beaulieu,^^  and 
Gide  ^^  dwelt  on  use  as  the  test  for  "consumption,"  use 
being  sometimes  identified  with  destruction  physically, 
or  of  values,  and  then  again  not. 

"Elements  of  Political  Economy,  edit,  of  1830,  vol.  1,  pp.   118-20. 

"  Political   Economy,    edit,   of  1887,    pp.    292-93. 

"  Herrmann,  F.  B.  W.  Staatswirtscliaftliche  Untersuchungen,  1832, 
pp.  328-29. 

"  Schulze,  F.  G.     National  okonomie,  1850,  p.  269. 

"  Das  (Je.'^ellscliaftliclip  System  der  Menschlichen  Wirtschaft,  1873,  §  4. 

"  IIandl)uch,  vol.  1,  pp.  085-80.  See  also  Cohu,  G.  Grundlegung  der 
Nationalilkonomie,  1885,  vol.  1,  p.  212. 

*' Cours  d'Economie  I'olitique,  vol.  1,  p.  053. 

"  Les  Progrr&s  de  la   Science  Econoiiiique,   1890,   vol.   2,  p.  486. 

•"Cours  d'Economie  Politique,   vol.   1,  p.   114. 

"Cours  d'F>conomie   Politique,   1909,   vol.   1,   p.  307. 

"Traits  Th^oretique  et  Pratique  de  I'Economie  Politique,  vol.  4,  p.  200. 

"Political  Economy,  trnnslate<l  and  published  by  Heath  (D.  C.)  &  Co. 
from  3.  French  edition,  Book  5,  ch.   1. 


UTILITARIANISM  169 

As  against  this  idea,  however,  we  find  thinkers  like 
Say,^*  Boilcau,  Storch,  Rau,  Roscher  prefer  the  com- 
petitive view,  according  to  which  one  had  "consumed'* 
in  losing  values,  be  they  socially  measurable  or  not. 
Boileau  in  his  "Introduction  to  Political  Economy,'*  1809, 
tells  us:  "Consumption  may  be  effected  by  nature,  by 
individuals,  or  by  society  at  large."  .  .  .  "To  consume 
is  to  destroy  the  utility  or  the  value  of  things."  ^^  Use 
then  was  an  ordinary  antecedent  to  consumption,  but  it 
could  not  be  its  sole  cause.  Rather  it  was  a  question  of 
either  incurring  a  loss  of  wealth  individually  conceived, 
or  of  not  incurring  it.  In  the  former  case  there  was 
consumption,  in  the  latter  not.  The  problem  reminds  one 
of  the  controversies  about  unproductive  versus  produc- 
tive labor  or  use  of  wealth.  What  was  used  "produc- 
tively," and  what  not?  The  disputants  never  grew  tired 
of  this — to  us— falsely  stated  question:  and  yet  it  had 
to  be  admitted  that  in  the  first  place  it  depended  upon 
the  point  at  which  "economic"  facts  ceased  to  be 
"economic,"  and  in  the  second  place  upon  the  definition 
of  value.  If  the  orthodox  Utilitarian  premises  ruled, 
productiveness  was  a  function  of  value-gains,  whether 
these  represented  mere  acquisition  or  effort  resulting  in 
tangible  wealth.  To  say  like  Senior  that  unproductive 
consumption  "occasions  no  ulterior  product, ^^  had  sense 
only  on  the  assumptions  just  stated. 

But  see  how  fickle  the  mind  of  the  Utilitarians  also 
with  regard  to  "cost,"  a  concept  truly  fundamental  in 
economic    analysis !      Several   definitions   became   current 

"Treatise  on  Political  Economy,  American  edit,  of  1827,  Boolt  III, 
ch.  1  and  4. 

'"'Pages  341-42.  See  also  Roscher,  W.  Grundlegungen  der  National 
okonomie,  2.  edit.,  vol.  1,  pp.  405-10 ;  and  Kau,  K.  H.  Lohrbuch  der 
Politischen  okonomie,   (1.   edit.,   vol.    1,   pp.   412-1.'). 

^'  Political  Economy,  2.  edit.  For  a  brief  discussion  of  Consumption 
see  Keynes,  J.,  Scope  and  Method  of  Political  Economy,  ch.  3,  Note,  or 
for  a  fuller  treatment,  Cossa,  E.,  Del  Consume  delle  Richezze,   1898. 


170    THE  DEVELOPMENT  OF  ECONOMICS 

after  1800.  For  instance,  cost  as  labor  expended  upon 
the  object,  or  as  labor  necessary  to  its  reproduction, 
or  as  labor  saved  for  the  buyer  of  the  article  if  otherwise 
he  should  have  to  produce  it  himself.  In  each  case  the 
standard  and  the  measure  both  were  labor — a  notion  of 
long  lineage  and  revived  by  Smith, — but  owing  to  differ- 
ences in  personal  capacity  or  productiveness  and  in  rates 
of  production  relative  to  two  or  more  instances  of  time 
a  choice  had  to  be  made  which  some  found  embarrassing. 
Besides,  there  was  the  idea  of  abstinence  of  Senior  and 
J.  S.  Mill  and  A.  Marshall ;  the  distinction  between  labor 
or  material  outlays  and  monetary  expenses,  past  or 
present  or  impending,  and  finally  the  idea  of  labor  pain 
which  Cairnes  discussed  at  leisure  in  his  "Some  Leading 
Principles  of  Political  Economy  Newly  Expounded," 
1874.  In  America  Carey  stood  for  reproduction  costs ; 
on  the  continent  the  original  costs  figured  most  promi- 
nently, though  the  dynamic  aspects  of  the  problem 
received  attention  especially  after  1850. 

Laws. — But  given  these  several  definitions,  the  weightier 
question  of  course  was  that  of  laws  ruling  economic 
interactions.  What  laws  could  be  found,  and  how  were 
th^y  to  be  formulated?  The  development  of  economics 
as  a  science  would  have  to  be  gauged  chiefly  by  success 
in  this  field.  It  was  the  boast  and  glory  of  the  Utilitarians 
that  they  had  improved  upon  original  statements  and 
delivered  unto  the  world  a  set  of  facts  upon  which  wise 
men  might  build,  if  they  cared  to  prosper  or  help  others 
to  prosper. 

As  a  general,  but  not  uninstructive  conception  of  such 
economic  laivs,  that  of  Keynes  in  his  "Scope  and  Method 
of  Political  Economy,"  1891,  even  though  written  with 
knowledge  of  the  marginal  standpoint,  may  be  cited  first. 
Among  propositions  of  universal  validity  he  mentions: 


UTILITARIANISM  171 

*'A  general  rise  of  values  is  impossible ;  if  two  kinds  of 
commodities  have  the  same  law  of  utility,  that  which  is 
rarer  will  be  the  more  valuable;  of  different  methods  of 
production  which  can  be  used  for  obtaining  a  given  result, 
the  one  that  can  do  the  work  the  most  cheaply  will  in 
time  supersede  the  others ;  facilities  of  transport  tend 
to  level  values  in  different  places,  while  facilities  of  pres- 
ervation tend  to  level  values  at  different  times.  In  the 
same  category  may  be  placed  such  propositions  as  that 
no  commodity  or  service  can  serve  as  a  universal  measure 
of  value  between  different  times  and  places,  and  that 
general  over-production  in  a  literal  sense  is  impossible."  ^^ 
Most  of  these  assertions,  it  will  be  seen,  are  deduced  di- 
rectly from  premises  in  psychology ;  while  the  first  is  an 
axiom  and  the  second  an  inference  from  the  fact  of  un- 
equal incomes. 

However,  one  must  go  to  particulars  in  order  to 
appraise  correctly  the  value  of  Utilitarian  economics ;  and 
here  the  first  crucial  test  concerns  itself  with  the  deter- 
mination of  price. 

Thanks  to  definitions  of  value  and  cost  already  given 
several  standard  solutions  came  into  vogue.  At  the  outset 
namely  labor  was  deemed  to  be  not  only  a  sufficient  cause, 
but  also  the  sole  measure  of  value,  respectively  of  price. 
The  question  merely  arose  whether  it  should  be  labor 
spent  in  the  past  or  labor  requisite  to  the  reproduction 
of  the  good ;  both  being  considered  determiners  by  differ- 
ent thinkers.  Malthus  was  among  the  first  to  stress  costs 
of  reproduction.  Carey  agreed  to  this,  but  thought  that 
labor  saved  was  the  criterion  rather  than  labor  spent  by 
the  producer.  Bastiat  is  best  known  as  the  defender  of 
this  view,  though  he  can  scarcely  be  called  its  originator. 
But  furthermore,  the  Smithian  dual  treatment  of  costs, 

"  Page  295. 


172    THE  DEVELOPMENT  OF  ECONOMICS 

involving  now  labor  exclusively,  now  costs  as  the 
entrepreneur  understood  them,  was  resumed  with  vigor 
by  Ricardo,  with  the  result  that  it  not  merely  changed 
current  concepts  of  capital  and  profits,  but  particularly 
eliminated  labor  as  the  chief  measure  of  values.  The 
conflict,  to  be  sure,  did  not  terminate  with  the  recognition 
of  the  difference,  for  we  find  it  discussed  more  fully  by 
continental  writers,  and,  on  the  other  hand,  the  labor 
concept  appealed  to  the  radical  wing  who  aimed  at  an 
overthrow  of  the  prevailing  competitive  system;  but 
certainly  the  logic  of  events  was  with  the  expositors 
of  business  expense.  These  pecuniary  outlays  were  taken 
more  and  more  seriously.  Either  as  an  average  or  as  a 
maximum,  as  in  the  researches  of  the  German  Herrmann, 
they  served  to  explain  price.  To  some  like  Carey  it  was 
expenses  of  reproduction;  to  others  the  original  outlay 
on  the  supposition  that  nothing  else  changed.  The  facts  of 
change  had  to  be  ignored,  for  Marshall's  deus  ex  machina 
in  the  shape  of  a  long-time  cost  and  a  representative  firm 
had  not  yet  been  introduced.  But  on  the  Ricardian  prin- 
ciple the  price  of  a  finished  article  was  held  not  to  include 
rentals.  As  long  as  his  concept  of  one-use  lands,  no-rent 
lands,  differential  productivities,  and  population-pressure 
seemed  irrefutable  rent  could  not  figure  in  such  prices. 
But  what  of  the  law  of  supply  and  demand?  Was  this 
to  be  trodden  under  foot  because  of  costs  in  the  objective 
sense?  The  answer  was:  By  no  means.  Demand,  meaning 
by  it  want  accompanied  by  purchasing  power,  was  as 
genuine  a  factor  in  the  situation  as  ever ;  but  one  should, 
nonetheless,  regard  it  as  only  a  function  of  value  on  the 
one  hand,  and  of  supply  on  the  other.  Malthus,  e.  g., 
had  already  warned  his  readers  that  supply  and  demand 
is  "the  dominant  principle  in  the  determination  of  prices,'* 
and  "costs  of  production  can  do  nothing  but  in  subordi- 


UTILITARIANISM  173 

nation  to  It,  that  Is  merely  as  this  cost  affects  .  .  .  the 
relation  which  the  supply  bears  to  the  demand."  ^®  This 
was  in  itself  quite  a  conundrum.  However,  by  the  time 
that  J.  S.  Mill  wrote  his  "Principles"  it  was  necessary  to 
go  still  farther,  lest  the  public  should  be  altogether  in 
the  dark.  So  now,  in  spite  of  an  audacious  juxtaposition 
of  labor  costs  and  expenses — in  which  even  taxes  had  a 
part — the  theorem  was  propounded  which  has  since 
become  a  commonplace.  To  wit,  we  are  told  that  sup- 
ply and  demand  cannot  be  ratios,  nor  that  it  is  fair 
to  think  of  a  causal  relation  running  in  one  direc- 
tion, since  in  reality  the  definition  of  demand  and 
value  prove  merely  that  supply  and  demand  must  equate 
at  some  point,  for  "competition  equalizes  them."  Say 
had  long  ago  called  attention  to  the  inadequacy  of 
the  Smithian  formula.  Now,  a  half  century  later,  it  is 
argued  that  demand  depends  on  value  just  as  truly  as 
the  reverse  may  be  asserted.  For  commodities  therefore 
"not  susceptible  of  being  multiplied  at  pleasure"  (and 
this  class  Mill  admitted  is  large),  "the  value  which  a 
commodity  will  bring  in  any  market  is  no  other  than  the 
value  which,  in  that  market,  gives  a  demand  just  sufficient 
to  carry  off  the  existing  or  expected  supply."  ^^  Nomi- 
nally this  explanation  covered  only  the  group  mentioned, 
namely,  the  non-reproducibles  at  will,  but  on  second 
thought  its  importance  for  all  other  articles  became  pal- 
pable enough.  If  Mill,  therefore,  found  a  price  law  for 
goods  not  reproducible  at  all,  and  a  second  for  goods 
reproducible  at  changing  returns,  this  did  not  deceive 
other  writers.  Increasingly  expenses  are  analyzed  at  the 
sacrifice  of  non-competitive  costs ;  increasingly  the  issue 
is  seen  to  lie  as  between  demand  and  supply,  the  latter 
going  back  to  expenses.     The  absence  of  a  proportionate 

^'  Principles  of  Political  Economy,  ch.  2,   §  3. 

"  Mill,  J.  S.     Principles  of  Political  Economy,  Book  III,  ch.  2. 


174    THE  DEVELOPMENT  OF  ECONOMICS 

rise  or  fall  of  prices  for  changes  in  supply  is  noted  by 
statistical  inquiries.  Tooke's  announcements  exercised 
a  deserved  influence  over  theorists  in  his  country.  The 
law  of  price  continues  to  absorb  people's  interest,  but 
unanimity  is  no  longer  to  be  hoped  for  as  perhaps  in  the 
days  of  Adam  Smith. 

As  to  productivity,  meaning  output  relative  to  outgo, 
a  consensus  of  opinion  could  more  easily  be  reached, 
for  it  was  understood  pretty  widely  that  such  rates 
referred  to  physical  quantities.  Rightly  or  wrongly,  the 
phrase  was  given  that  meaning.  It  had  not  infrequently 
been  stressed  how  nature  set  bounds  to  supply,  the 
Ricardians  bewailing  her  stinginess,  just  as  the  Physio- 
crats had  rejoiced  in  her  liberality.  But  independent  of 
this  productivity  could  best  be  studied  as  a  change  of 
returns  in  tangible  goods.  Laws  of  nature.  Mill  wrote 
in  his  "Principles,"  here  ruled  inexorably,  while  dis- 
tributive arrangements  rested  with  man  himself.  Waiving 
altogether  the  logic  of  this  distinction,  in  the  light  of 
Utilitarian  premises,  we  need  merely  ask  whether  at  that 
rate  the  law  of  diminishing  returns  could  fitly  be  asso- 
ciated with  agriculture;  and  the  answer  will  be:     Yes. 

Once  more  a  collectivistic  view  crept  into  an  analysis 
supposedly  resting  on  competitive  premises.  The  ratio 
of  food  to  population  was  too  important  to  be  disre- 
garded. Not  value-returns  per  value,  not  unit-cost  in 
stuff  per  return  in  stuff  even,  but  subsistence  per  capita — 
this  became  the  burning  question.  It  was  not  by  accident 
either;  for  the  swiftly  growing  population  of  the  L^nited 
Kingdom,  due  to  the  industrial  revolution,  cut  at  the 
old-time  surplus  of  foods  in  two  ways,  first  by  reducing 
acreage,  and  secondly  by  industrializing  capital  so  that 
exports  of  manufactures  could  furnish  a  basis  for  food 
purchases   abroad.      Thus   the  birth-rate   turned   out   to 


UTILITARIANISM  175 

depend  in  one  sense  on  industry,  while  yet  in  another  the 
relative  decline  of  farming  haunted  theorists.  Intensifi- 
cation could  accomplish  much,  but  a  disproportionate 
outlay  of  materials  and  labor  went  with  it.  Hence  the 
fear  of  falling  productivity  measured  by  weight  and  tale ; 
,hence  the  flow  of  books  and  tracts  from  the  press,  con- 
demning now  the  laborer  with  a  large  family,  now 
employers  for  their  tolerance  of  conditions  that  seemed 
truly  barbarous.  Nothing  else  than  a  careful  husbandry 
of  resources  could  alleviate  such  misery.  On  the  one  hand 
thrift  among  wage-earners ;  on  the  other  a  correct  use 
of  surplus-funds ;  this  appeared  to  be  the  logical  way 
out  of  difficulties.  Saving  was  everything,  or  at  any  rate 
far  more  than  technical  progress.  Conservation,  not 
invention,  was  held  to  be  the  source  of  opulence.  Capi- 
talists therefore  figured  as  the  saviors  of  the  country 
if  they  administered  their  reserves  prudently. 

The  distribution  of  the  social  dividend  became  an  impor- 
tant matter  for  this  reason  alone,  though  to  be  sure  it 
was  also  of  cardinal  significance  from  a  theoretical  stand- 
point. But  in  spite  of  definitions  and  price  analysis 
incomes  were  not  consistently  measured  as  prices,  as  for 
instance  Say  and  Rau  had  urged  in  their  endeavor  to 
reduce  all  shares  to  three:  Wages,  profits,  and  rent.  A 
distinction  was  made  before  long  between  net  profits  and 
interest,  due  indirectly,  no  doubt,  to  the  growing  promi- 
nence of  banking  and  credit.  But  from  the  outset  the  law 
governing  wages  was  considered  different  from  that  gov- 
erning rent,  and  both  were  set  apart  from  the  analysis  of 
interest  or  profits,  until  Malthusianism  was  definitely 
abandoned. 

Rent  which  according  to  Smith  was  a  price  paid  to 
privileged  landholders  was  thereafter  explained  as  a 
result  of  over-population.     It  was  a  differential  product, 


176    THE  DEVELOPMENT  OF  ECONOMICS 

measured  by  yields  above  what  worst  soils  could  bring, 
and  certain  to  rise  so  long  as  the  number  of  mouths  to 
feed  increased  faster  than  land  itself.  There  was  no 
remedy  for  the  evil,  if  so  it  might  be  called,  for  prices 
followed  maximum  costs  of  production  at  any  given 
instant  of  time,  and  if  the  owners  of  superior  soils 
pocketed  the  differential,  that  was  human  nature  every- 
where. The  fault  lay  not  with  the  proprietor,  but  with 
nature  or  with  the  people  who  would  marry  and  reproduce 
their  kind  regardless  of  expenses. 

However,  it  was  eventually  admitted  that  the  idea  of 
differentials  was  not  applicable  merely  to  agriculture. 
If  rent,  as  in  successive  installments  had  been  shown 
by  Anderson,  West,  Malthus,  and  Ricardo,  was  due 
to  unequal  productivities  of  the  soil,  there  were  also 
differences  of  yield  in  the  use  of  labor  or  of  capital. 
Natural  inequalities  existed  everywhere.  There  was  noth- 
ing peculiar  about  the  circumstance  that  accounted  for 
rent.  "Superior  mental  power,  regarded  with  a  view 
to  the  production  of  wealth,"  Cairnes  emphasized  in  his 
writings,  also  "is  an  instrument  of  production  perfectly 
analogous  to  superior  fertility  of  soil;  they  are  both 
monopolized  natural  agents,  and  the  share  which  their 
owners  obtain  in  the  wealth  which  they  contribute  to  pro- 
duce is  regulated  by  precisely  the  same  principle."  ^^ 
So  F.  Walker,  commenting  on  Archbishop  Whately's 
discussion  of  rents  and  profits,  adds :  "Profits,  the  remu- 
neration of  the  entrepreneur,  partake  very  largely  of  the 
nature  of  rent,  being  a  species  of  the  same  genus ;  and 
so  far  as  this  is  the  case,  profits  do  not  form  a  part  of 
tlie  price  of  the  products  of  industry,  and  do  not  cause 
any   diminution    of    the   wages    of  labor."  ^^      The   over- 

">  Character  and  Logical  Method  of  Political  Economy,  1869,   p.   13. 
"  Political  Economy,  Part  IV,  ch.  4,    $  279. 


UTILITARIANISM  177 

confident  Ricardians  thus  were  told:  If  rent  formed 
no  part  of  price,  neither  did  profits  or  wages  above 
subsistence,  and  if  rent  was  a  justifiable  increment  re- 
gardless of  social  consequences,  so  would  be  any  rate 
of  wage  or  profit  or  interest,  no  matter  how  remote 
from  competitive  limitations.  The  error  of  drawing  a 
line  between  price  and  income  thus  led  to  the  same  sim- 
plification that  a  strict  price  analysis  would  have  in- 
volved, for  not  only  was  the  law  of  diminishing  returns 
expanded  into  a  principle  of  natural  inequality  among 
all  factors  of  production,  but  in  addition  all  shares, 
interest  not  excepted,  proved  to  consist  of  a  subsistence 
allowance  and  a  super-share,  the  battle  waging  about  the 
disposition  of  this  latter. 

Particularly  under  the  static  conditions  premised  by 
both  Utilitarians  and  later  the  Marginists  such  a  conflict 
was  inevitable  if  superiority  meant  no  more  than  greater 
earning  powers  according  to  definition  of  value  and  pro- 
ductivity. Since  the  economic  process  was  pictured  as  one 
of  constant  factors,  pricing  and  distribution  had  neces- 
sarily to  entail  a  struggle  among  claimants.  It  was  natur- 
ally held  that  what  one  gained  another  lost.  Even  differen- 
tial mental  abilities  would  thus  hold  out  no  hope  to  society 
at  large.  The  masses  of  the  people  were  thrown  upon 
their  own  meager  resources  in  a  contest  where  instincts 
invariably  succumbed  to  selfish  cunning.  Partly  for  this 
reason  Utilitarian  economics  became  a  "dismal  science," 
as  Carlyle  dubbed  it ;  and  from  this  standpoint  also 
Ricardo  could  make  the  often  quoted  remark:  "Wages 
like  all  other  contracts  should  be  left  to  the  fair  and  free 
competition  of  the  market  and  should  never  be  controlled 
by  the  interference  of  the  legislature."  ^~  If  pricing  was 
the  result  of  the  forces  premised  by  the  hedonists,  and 
"  Principles  of  Political  Economy,  ch.  5. 


178    THE  DEVELOPMENT  OF  ECONOMICS 

if  the  deductive  method  had  to  work  with  the  materials 
offered  by  the  environment  social  and  physical  at  any  one 
moment,  then  certainly  there  was  no  other  outlook  possi- 
ble. Malthus  was  right  in  saying:  **It  is  most  desirable 
that  the  laboring  classes  should  be  well  paid,  for  a  much 
more  important  reason  than  any  that  can  relate  to 
wealth;  namely,  the  happiness  of  the  great  mass  of 
society.  .  .  ."  But  "ozering  to  the  principle  of  population 
all  the  tendencies  are  the  other  •way.''''  ^^  The  iron-law 
of  wages  of  Rodbertus  which  was  in  everybody's 
mouth  could  not  be  defied  as  long  as  the  Malthusian 
principle  stood  unshaken.  The  wages-fund  idea  itself 
was  in  no  wise  in  contradiction  with  it,  since  any  sur- 
plus voluntarily  bestowed  by  capital  upon  labor  served 
but  to  increase  the  number  of  children  hungering  for 
food.  Thornton  might  write  on  "Overpopulation  and  its 
Remedy,"  1846,  but  what  could  be  done  about  it? 

Still,  the  wages-fund  concept  had  its  roots  not  in  the- 
ories of  population,  but  in  erstwhile  definitions  of  pro- 
duction and  capital.  It  must  be  charged  against  the 
Physiocrats  and  Smith  that  men  later  tried  to  determine 
the  wage-level  by  a  ratio  of  surplus  to  laborers.  For 
since  to  produce  meant  to  turn  out  concrete  commodi- 
ties, since  capital  was  a  surplus  due  to  methods  of  pro- 
duction considered  constant,  it  followed  that  the  owners 
of  "stock"  were  the  umpires  in  the  game.  They  decided 
who  had  won,  the  non-producers  or  the  producers.  They 
held  the  destinies  of  the  nation  in  their  hand  because 
they  could  use  their  wealth  either  for  further  production 
of  materials,  or  for  maintenance  of  retinue  and  luxuries, 
personal  and  official  services  of  all  kinds  included.  In 
his  "Principles'*  Mill  tlius  divides  circulating  capital 
spent    upon    both    productive    and    unproductive    labor, 

"  Principles  of  Political  Economy,  1821,  p.  3G5. 


UTILITARIANISM  179 

as  he  defined  the  terms,  by  the  total  number  of  hired 
laborers.  The  quotient  was  the  average  wage,  while 
the  dividend  constituted  the  "wages-fund."  ^*  The 
greater  the  number  of  unproductive  laborers,  the  worse 
off  eventually  the  whole  population,  for  output  could  not 
then  increase  as  fast  as  the  actual  surplus  of  foods  might 
allow. 

Utilitarianism  was  not  of  course  seriously  affected 
by  this  argument,  as  the  future  proved  sufficiently.  How- 
ever, it  seemed  significant  for  a  determination  of  wages 
if  one  had  in  mind  the  relative  obligations  of  capital 
and  workingmen;  and  from  this  standpoint  it  was  no 
small  matter  if  J.  S.  Mill  recanted  after  men  nowhere 
near  his  equal  had  raised  their  objections.  Opposi- 
tion came  from  various  quarters,  some  of  them  outside 
of  the  United  Kingdom.  Thus  Rae  and  Carey  derided 
the  static  notion  of  wage  involved  in  the  wages-fund  doc- 
trine, while  Thiinen  and  Walker  (F.)  advanced  a  pro- 
ductivity theory  that  accorded  to  labor  precisely  what 
Mill  had  so  much  at  heart,  namely,  a  share  somewhat  pro- 
portionate to  technical  improvements.  The  German  econ- 
omist put  up  a  formula  by  which  the  laborer  should  get 
a  sort  of  geometrical  average  of  products  resulting  from 
his  and  the  machine's  efficiency.  What  the  least  effec- 
tively employed  man  produced  was  to  be  augmented  by 
a  portion  of  capitalistic  effort.  Walker,  on  the  other 
hand,  knew  nothing  of  margins,  but  contended  that  com- 
petition naturally  favored  an  equitable  distribution  of 
the  product,  labor  obtaining  a  wage  that  rose  as  inven- 
tion multiplied  its  productiveness  through  additional  or 
superior  use  of  machines.  This  then  was  just  as  prom- 
ising as  Cairnes'  notion  of  a  non-competitive  laborer  who 
could  not  be  cudgeled  by  an  unscrupulous  employer. 

"Book  II,  ch.  11,  §  1. 


180    THE  DEVELOPMENT  OF  ECONOMICS 

Besides — and  without  presuming  to  have  mentioned  all 
the  doctrinal  points  regarding  net  profits,  over-produc- 
tion, currency  and  price-levels,  credit  and  taxation — it 
must  be  admitted  that  theories  did  not  after  all  find  ex- 
tended application  In  government.  The  value  of  eco- 
nomics in  this  respect  was  not  as  great  as  might  have 
been  expected.  Public  authorities  everywhere,  however 
sincere  their  desire  to  benefit  by  the  new  gospel  of  wealth 
and  welfare,  sooner  or  later  fell  back  upon  their  own 
devices.  Excepting  the  field  of  banking  and  public 
credit,  where  the  influence  of  economic  doctrine  was 
marked  both  in  England  and  on  the  continent,  govern- 
ments did  not  respond  very  sympathetically.  For  the 
repeal  of  the  corn-laws  in  England  had  reasons  other 
than  Smithian  theories,  which  came  in  the  nick  of  time 
but  could  not  have  won  a  fight  against  practical  inter- 
ests. Besides,  there  is  the  irrefragable  evidence  of  other 
countries  whose  commercial  policies  almost  consistently 
ran  counter  to  Laissez  Faire.  Even  in  the  United 
States  Protection  made  considerable  headway  before 
1846,  while  In  Europe  France  alone  followed  the  British 
example  for  any  length  of  time.  It  is  symptomatic  in- 
deed that  Carey  and  List  stood  for  protection,  while 
Bastiat  and  Mill  about  the  same  time  espoused  free-trade ; 
or  that  the  countries  least  conversant  with  economics, 
such  as  Denmark,  Belgium,  Holland,  almost  regularly 
uphold  International  competition.  The  great  majority  of 
French  economists  throughout  the  nineteenth  century 
preached  free-trade,  but  rarely  to  please  the  people. 
Their  position  was  somewhat  like  Cournot's  who  in  his 
"Researches  Into  the  Mathematical  Principles  of  the 
Theory  of  Wealth,"  1838,*''''  had  to  confess  that  pro- 
tection need  not  be  a  bad  thing  if  it  did  not  offset  ad- 

•°  Last  chapter. 


UTILITARIANISM  181 

vantages  gained  by  other  opportunities  lost,  or  if  it 
didn't  lead  to  class  taxation;  both  of  which  it  was  dif- 
ficult to  prove.  So,  under  the  circumstances,  what  else 
was  there  but  to  consent  to  policies  diametrically  op- 
posed to  a  static  view  of  production?  The  free-trader 
faced  an  insurmountable  obstacle! 

Decline  of  Utilitarian  Economics. — Utilitarian  eco- 
nomics, however,  remained  not  merely  unheeded  at  courts 
of  legislation,  but  what  is  more  to  the  point,  weighty 
theoretical  objections  appeared.  The  theory  of  dimin- 
ishing returns,  for  instance,  was  extended  by  v.  Thuenen 
to  the  whole  realm  of  production.  It  was  shown  even 
then  that  rightly  understood  agricultural  laborers  were 
little  worse  off  than  the  urban.  In  the  second  place 
the  Malthusian  theorem  was  combated  vigorously  by  a 
number  of  writers  partly  out  of  mere  humanitarian  sen- 
timent, partly  because  the  case  for  agriculture  was  not 
held  to  be  nearly  as  grim  as  the  English  preacher  had  made 
out.  His  later  concessions  were  therefore  taken  to  be  more 
truthful,  and  if  so  the  distributive  problem  had  to  be, 
of  course,  restated.  In  the  end  such  was  the  effect  of 
the  counterblast  of  men  like  Lloyd,  Chalmers,  Gray,^^ 
Scrope  ^'^  and  Donisthorpe  in  England,  Sismondi  in 
France,  and  Wayland  and  Carey  in  America.  But  for 
that  matter,  had  not  Senior  himself  said :  "A  popula- 
tion increasing  more  rapidly  than  the  means  of  sub- 
sistence is,  generally  speaking,  a  symptom  of  misgovern- 
ment  indicating  deeper-seated  evils,  of  which  it  is  only 
one  of  the  results"?  ^^ 

The  wages-fund  idea  had  been  definitely  abandoned  at 
the  time  of  J.  S.  Mill's  death  (1873).  It  could  not  sur- 
vive the  successive  attacks  of  Thornton,  Jones,  Leslie, 

"Gray,  J.     The  Social  System,  1831,  ch.  10. 

«'  Scrope,  G.   P.     Principles  of  Political  Economy,  1833. 

«*  Political  Economy,  edit,  of  1849,  p.  49. 


182    THE  DEVELOPMENT  OF  ECONOMICS 

and  of  Herrmann  in  Germany.  Mill  himself  had  recog- 
nized its  uselessness  and  said  so  openly.  The  Ricardian 
rent  doctrine  suffered  at  the  hands  of  Jones,  Rodbertus, 
Carey,  and  Bastiat.  In  fact,  it  was  one  of  the  first  fun- 
damental points  to  be  assailed  in  an  attempt  at  obtain- 
ing a  clear-cut  case  for  competitive  pricing.  As  a 
monopoly,  rent  had  a  place  and  could  be  fitted  into  rules, 
each  and  every  one  of  which  had  its  exception.  But 
otherwise  it  occupied  an  anomalous  position,  besides  be- 
ing vulnerable  from  the  historical  standpoint  as  Carey 
was  not  slow  to  indicate. 

That  labor  measured  values  was  also  found  to  be  an 
untenable  assertion,  the  ultimate  answer  to  which  was  a 
resort  to  either  costs  of  reproduction,  as  with  Malthus, 
or  to  supply  and  demand  which  really  involved  a  petitio 
principii,  or  to  monopoly  or  maximum  costs,  these  latter 
meaning  for  the  most  part  enterpreneur  expenses,  the 
discussion  of  which  is  particularly  convincing  in  Herr- 
mann and  Mangoldt.  But  if  all  this  was  granted,  what 
became  of  the  relation  of  price  to  producer-shares  ?  Evi- 
dently, the  two  need  in  no  wise  coincide.  Not  only  were 
there  incomparable  kinds  of  labor,  as  MacLeod  and 
Cairnes  had  pointed  out ;  not  only  were  there  discrepan- 
cies involved  in  the  traditional  analysis  of  prices  or 
shares,  but  furthermore  the  reliance  upon  laws  of  dis- 
tribution psychologically  derived  had  proven  futile. 
Ever  and  anon  the  non-competitive  standpoint  en- 
croaches upon  the  competitive.  Even  Malthus  could 
write:  "If  we  were  to  define  wealth  to  be  whatever  has 
value  in  exchange,  it  is  obvious  that  acting,  dancing, 
singing,  and  oratory  would  sometimes  be  wealth,  and 
sometimes  not."  ^^  Precisely  in  this  temper  had  J.  Rae 
in  1834  enlarged  upon  tlie  earlier  criticisms  of  the  Earl 

"  Principles  of  Political  Economy,   p.  34. 


UTILITARIANISM  183 

of  Lauderdale,  drawing  a  sharp  line  of  division  between 
social  and  individual  wealth,  and  ending  his  discourse  with 
a  plea  for  scientific  government.  Rodbertus  and  Wagner 
in  Germany  accentuated  social  as  against  acquisitive 
wealth,  an  awkward  way  of  renouncing  the  Utilitarian 
premises.  Continually  facts  outside  of  the  exchange 
regime  were  brought  in  to  supplement  explanations 
from  within.  In  his  "Principles  of  Plutology,"  1876,^'' 
Donisthorpe  passed  judgment  on  "classicism"  as  a  whole, 
convinced  that  neither  the  law  of  the  division  of  labor, 
nor  free-trade,  nor  Malthusianism,  nor  Ricardian  rent  had 
justified   itself. 

The  golden  harmonies,  too,  that  Carey  and  Bastiat 
sung  about,  had  existence  only  outside  of  the  Utilitarian 
economics,  if  we  may  believe  these  men.  In  1837  Carey 
could  write:  "The  prosperity  of  nations,  and  the  hap- 
piness of  the  individuals  composing  them  are  in  the 
ratio  in  which  the  laws  of  nature  have  been  allowed  to 
govern  their  operations,  and  .  .  .  the  poverty,  misery, 
and  distress  that  exist  are  invariably  to  be  traced  to 
the  interference  of  man  with  those  laws,  and  they  exist  in 
the  ratio  of  that  interference" ;  "^^  but  thirty-five  years 
later  we  read  in  "The  Unity  of  Law":  "Such  is  the 
politico-economical  science  whose  .  .  .  every  suggestion 
is  opposed  to  that  which  common  sense  and  common 
humanity  teach.  .  .  ."  ^"  The  system  supposedly 
grounded  on  solid  premises  had  led  to  absurdities,  per- 
mitting conditions  of  life  for  which  Carey  entertained 
nothing  but   contempt. 

His  was  a  confession  stronger  in  words,  but  not 
more  sincere  than  tliat  of  Bastiat  on  behalf  of  the  mil- 
lions.     The   belief    of    this    Frenchman    that    "God    has 

"Ch.  1. 

"  Principles  of  Political  Economy,  Part  I,  p.  xvi. 

"  Page  29. 


184    THE  DEVELOPMENT  OF  ECONOMICS 

placed  within  each  individual  an  irresistible  impulse 
toward  the  good,  and  a  never-failing  light  which  enables 
him  to  discern  it"  ''^  was  rudely  shaken  by  the  distress 
of  the  people  around  him.^*  Somehow  it  became  clearer 
as  the  decades  rolled  by  that  the  cosmic  harmonies  created 
nothing  but  discord  among  humans.  Individualism  ram- 
pant had  not  justified  the  optimism  of  an  earlier  age,  for 
misery  was  real  and  widespread.  Over-population  was  a 
fact,  not  a  myth  of  the  philosopher.  Crises  and  years 
of  depression  went  over  western  Europe  again  and  again, 
at  not  too  long  intervals.  A  proletariat  had  emerged 
out  of  the  industrial  revolution  that  was  hostile  to  Let- 
Alone  policies  and  eager  for  betterments.  Political 
rights  were  demanded  and  yet,  upon  use,  found  an  insuf- 
ficient protection  against  ills  that  the  organization  of 
production  and  exchange  somehow  gave  rise  to.  Legis- 
lators felt  the  need  of  heroic  efforts  to  appease  the  mul- 
titudes, and  theorists  were  impressed  with  the  breach 
steadily  widening  between  what  they  preached  and  what 
grim  reality  proved.  Economics  apparently  would  either 
have  to  revise  many  of  its  definitions  and  arguments  within 
the  limits  set,  or  else  start  over  again  from  altogether 
new  premises. 

The  issue  was   clear,  but  the  outcome   unpredictable. 

"  Harmonies  Economiques. 

'•  For  a  criticism  of  Bastiat  and  a  clear  distinction  between  economic 
expediency  and  abstract  justice  see  Cairnes,  J.  E.,  in  i^ome  Leading  Prin- 
ciples of  Political  Economy  Newly  Expounded,  1874,  p.  209. 


CHAPTER  SIX 
HISTORISM 

Idea  of  Collectivism. — The  Historical  School  among 
economists  became  a  power  to  reckon  with  during  the 
sixth  decade  of  the  last  century,  that  is,  about  the  time 
that  Utilitarianism  had  reached  the  apogee  of  its  fame.  It 
might,  therefore,  seem  strange  that  the  two  should  be 
virtually  contemporary  if  we  didn't  know  that  the  His- 
torical movement,  or — to  give  it  a  brief  name — Historism, 
was  as  much  a  reaction  against  Smith's  Naturalism  as 
against  the  Ricardo-Mill  group,  while  furthermore  His- 
torism was  continental  in  its  origins  and  hence  not  likely 
to  agree  with  British  Utilitarianism  in  any  form. 

To  the  founders  of  the  Historical  School  so-called,  which 
was  represented  at  first  by  a  mere  handful  of  men,  Nat- 
uralism and  Utilitarian  economics  were  substantially  one 
— a  view  one  can  hardly  condemn  once  the  Historical  out- 
look is  properly  understood.  There  was  no  doubt  that 
the  two  earlier  economic  systems  showed  important  re- 
semblances, in  that  both  built  on  individualism,  on  a 
static  notion  of  life,  on  premises  generally  speaking  that 
yielded  conclusions  altogether  distinct  from  actualities. 
Whatever  the  differences  between  Naturalists  and  Utili- 
tarians, or  between  members  within  the  latter  group — 
and  they  were  not  inconsiderable — they  did  offer  a  united 
front  in  their  treatment  of  Historical  critics.  They  in- 
sisted upon  the  universal  validity  of  their  theorems,  con- 

185 


186    THE  DEVELOPMENT  OF  ECONOMICS 

vinced  that  after  due  allowances  had  been  made  almost 
any  case  could  be  judged  by  their  principles. 

Now,  the  Historical  School  objected  to  this  way  of 
dealing  with  a  difficult  subject.  Its  adherents  felt  that 
things  were  not  as  simple  as  they  seemed,  that  super- 
ficiality was  frequently  mistaken  for  mastery,  and  mere 
logic  of  reasoning  for  verification  in  the  concrete.  The 
nonchalance  and  gruff  indifference  of  Utilitarians  to  eth- 
ics was  deplored  as  something  beneath  social  science.  At 
all  events,  it  was  argued,  much  remained  to  be  done  if 
the  misery  of  the  masses  was  not  to  increase,  thanks  to 
those  very  gentlemen  of  hedonistic  leanings. 

One  group  stressed  collectivism  without  having  re- 
course to  an  historical  doctrine ;  the  other  gave  all  facts, 
and  economics  particularly,  an  historical  setting,  but  in 
doing  so  championed  collectivism  no  less  than  the  first. 
All  members  of  the  Historical  School  were  collectivists, 
but  the  converse  did  not  hold,  though  the  majority  of 
collectivists  did  employ  the  historical  method  as  every 
student  of  socialism,  utopian  and  scientific,  is  well  aware. 
We  might  say  therefore  that  collectivism  is  the  broader 
term,  with  the  understanding,  however,  that  Historism 
is  -not  thus  accused  of  narrowness  in  any  other  sense. 
For  no  matter  how  one  may  finally  appraise  the  achieve- 
ments of  the  Historical  Movement,  there  is  no  doubt 
of  the  salutary  effects  it  had  upon  social  science. 

Collectivism  stood  for  a  more  or  less  definite  concept 
of  public  welfare,  for  an  emphasis  on  the  differences  be- 
tween men,  the  interdependence  of  functions  and  rights 
among  individuals,  the  relativity  of  good  and  evil,  or 
truth  and  error,  for  the  opposition  of  self  to  social  in- 
terests, and  the  rationality  of  control  over  citizens  by 
a  central  authority.  Historism,  in  its  turn,  represents 
the  habit  of  looking  back  for  an  explanation  of  existing 


HISTORISM  187 

ideas  or  institutions.  A  belief  in  change  and  motion  as 
an  eternal  factor  in  human  experience,  the  idea  of  rela- 
tivity just  as  collectivism  dealt  with  it,  and  finally  the 
search  for  repetitions  which  somehow  might  justify  the 
formulation  of  rules — such  were  salient  features  in 
Historism.  Actualities  outside,  and  the  need  for  ap- 
plications were  both  constantly  kept  in  mind.  Whether 
there  was  a  purpose  back  of  this  vast  phantasmagoria 
of  history  in  the  making,  or  of  history  already  made, 
not  all  collectivists  or  historians  were  willing  to  say. 
For  instance  some  of  the  French,  English,  and  Ger- 
man Utopians  and  less  radical  critics  of  Utilitarian  eco- 
nomics frankly  preached  theism,  convinced  that  God 
must  right  things,  that  history  moved  in  a  definite  direc- 
tion, or  that  even  in  a  static  view  the  hand  of  Providence 
could  not  be  ignored.  Yet  the  greater  number  of  col- 
lectivists of  both  shades  left  the  question  unanswered. 
The  aim  was  to  be  scientific  as  truly  as  the  Utilitarians 
had  professed  to  be,  with  a  similar  disdain  for  metaphysics 
and  a  bold  assumption  that  the  facts  themselves,  if  care- 
fully collated,  would  furnish  tlie  clew  to  all  riddles. 

What  the  two  movements,  the  collectivistic  in  the  wider 
and  the  Historical  in  the  narrower  sense,  had  in  com- 
mon was  a  violent  antipathy  to  the  hedonistic  premises 
of  Utilitarianism,  to  the  whole  scheme  of  Smith  and 
the  Ricardians  for  an  individual  measurement  of  legal 
and  moral  rights.  Not  the  self,  but  society,  not  one  but 
all,  not  a  class  but  the  entire  nation,  and  perhaps  not 
even  any  one  nation,  but  rather  mankind  in  the  lump, 
such  were  the  contrasts  made  by  the  rebels  in  economics. 
Done  with  Absolutes,  this  was  one  slogan !  Eighteenth 
century  empiricism  and  materialism  revived  for  new  pur- 
poses. As  the  Baron  d'Holbach  had  written  in  his  "Na- 
ture and  Her  Laws  as  Applicable  to  the  Happiness  of 


188    THE  DEVELOPMENT  OF  ECONOMICS 

Man  Living  in  Society'*:  "Man  will  ever  remain  a  mys- 
tery to  those  who  obstinately  persist  in  viewing  him 
with  eyes  prepossessed  by  metaphysics ;  he  will  always  be 
an  enigma  to  those  who  shall  pertinaciously  attribute  his 
actions  to  a  principle  of  which  it  is  impossible  to  form 
to  themselves  any  distinct  idea."  Transcendentalism,  so 
Saint  Simon  declared,  was  the  bane  of  thinkers  who 
sought  light  on  social  problems. 

But  furthermore,  ethics  itself  could  not  be  posited 
safely  on  anything  but  an  empirical  view  of  life.  Man 
and  his  actions  in  company  with  fellow  beings  must  fur- 
nish the  key  to  right  and  wrong.  A  moral  code  de- 
pended on  studies  that  had  nothing  to  do  with  the  rumi- 
nations of  a  closet  philosopher.  Hence  economics  must 
include  more  than  the  exchange  system  of  any  given  time 
or  place.  The  science  that  hoped  to  measure  values  and 
describe  accurately,  for  long  periods  to  come,  the  process 
by  which  wealth  was  produced,  distributed,  and  con- 
sumed could  not  confine  its  investigations  to  a  pecuniary 
world;  for  marketing  was  not  the  whole  of  intercourse, 
nor  earning  money  the  sole  proof  of  production.  Eco- 
nomic laws,  consequently,  were  invalid  if  not  related  to 
th6  social  process  as  a  whole.  A  much  greater  multi- 
plicity of  events  had  to  be  reckoned  with  than  the  Utili- 
tarians or  Naturalists  imagined.  Law  was  born  of  cir- 
cumstances in  time  and  space.  Variability  was  the  only 
thing  constant  or  continuous.  Even  the  premises  of 
Utilitarian  economics  were  subject  to  this  revision,  as  for 
instance  the  postulate  of  private  property  and  freedom  of 
contract.  Why  ground  a  system  of  economics  on  an  in- 
stitution that  might  disappear  in  the  course  of  time, 
indeed  which  had  not  always  flourished  as  it  does  to-day? 
The  collectivists  took  note  of  this  possibility  and  changed 
their     reasoning     accordingly.     "The     general     opinion 


HISTORISM  189 

seems  to  be,"  wrote  the  authors  of  the  "Doctrine  of  Saint 
Simon,"  which  came  from  the  press  soon  after  his  death 
in  1825,  "that  whatever  revolutions  may  take  place  in 
society,  this  institution  of  private  property  must  forever 
remain  sacred  and  inviolable,  as  if  it  alone  is  eternal. 
But  in  reality  nothing  could  be  less  correct.  Property 
is  a  social  fact  which,  along  with  other  social  facts,  must 
submit  to  the  laws  of  progress."  ^ 

This  is  the  new  attitude  adopted  by  the  collectivists 
of  many  classes.  Economics  treats  of  relative  facts,  and 
in  the  end  nothing  may  be  more  important  than  an  adapta- 
tion of  means  to  a  practical  policy.  Democracy  itself 
could  not  mean  much  without  economic  guarantees.  To 
have  rights  for  exercise  of  power  must  include  possession 
of  goods  whose  enjoyment  was  a  prerequisite  to  other 
abilities.  Representation  must  be  supplemented  by  or- 
ganization, or  by  Association  in  a  more  technical  sense. 
The  welfare  of  each  lay  in  cooperation ;  thus  alone  could, 
under  guidance  of  qualified  persons,  society  and  the  Ego, 
be  brought  on  one  plane  of  thinking. 

Collectivism  in  France. — Now,  this  departure  from  in- 
dividualism. Naturalistic  or  Utilitarian,  had  its  incep- 
tion in  ideals  older  than  the  science  of  economics,  or  at 
least  just  about  as  old.  Not  the  nineteenth,  but  the 
eighteenth,  century  laid  the  foundations.  In  France  the 
collectivistic  movement  first  gained  a  footing,  though  the 
weapons  it  employed  were  largely  of  British  origin.  The 
epoch  that  rang  with  the  shouts  of  natural  law  and  nat- 
ural rights  gave  birth  also  to  the  communistic  spirit 
of  the  Revolution.  Not  that  this  latter  itself  stood 
primarily  for  communism  or  socialism  as  later  under- 
stood,   but   that    many    of    the    arguments   basic    to   the 

*  Doctrines  de  Saint  Simon,  Exposition,  1829,  quoted  by  Gide,  Ch.,  and 
Rist,  Ch.,  in  their  History  of  Economic  Doctrines,  transl.  by  Richards,  R., 
p.  222. 


190    THE  DEVELOPMENT  OF  ECONOMICS 

revolt  against  the  Ancient  Regime  were  adaptable  also 
to  plans  of  a  distinctively  economic  nature.  The 
Physiocrats  honored  private  property  and  govern- 
ment. Nothing  was  farther  from  their  intentions  than 
an  upheaval  such  as  befell  their  country  in  1789.  But 
in  siding  with  the  Encyclopedists,  in  pointing  to  the 
ethics  of  nature  as  against  human  follies,  in  describ- 
ing the  process  by  which  wealth  came  and  went  in  annual 
waves,  all  of  it  the  fruits  of  the  earth,  but  much  of  it 
consumed  by  non-producers — in  discussing  jurisprudence 
and  morals,  politics  and  law,  wealth  and  waste  from  the 
standpoint  of  a  science  whose  propositions  reigned  above' 
monarchs,  the  French  thinkers  between  1740  and  1790 
prepared  the  public  mind  for  sweeping  changes. 

Mably  might  ridicule  the  Physiocrats,  but  that  only 
bettered  the  case  for  reformers.  Morelly  might  struggle 
with  adversities,  obscure  in  his  own  day  and  little  feared 
by  the  clergy,  but  his  "Essay  on  the  Human  Spirit," 
1743,  his  "Code  of  Nature,"  1755,  left  their  mark  upon 
minds  at  the  very  center  of  political  affairs;  for  in 
Sieyes  and  Mirabeau  the  Younger  the  revolutionists  found 
leaders  of  the  first  rank.  And  others  rose  from  the  rank 
and  file :  Babeuf ,  who  declaims :  "Perish  the  arts,  but  let 
us  have  real  equality."  "Let  everything  return  to  chaos, 
and  from  chaos  let  there  rise  a  new  and  regenerated 
world";  Barnave,  who  anticipated  many  of  the  ideas 
woven  into  a  materialistic  philosophy  by  Karl  Marx! 
And  then  tlie  utopias  of  Cabet,  Fourier,  Simon,  and 
Blanc !  Industrialism  and  Association  for  workmen 
that  otherwise  must  succumb  to  capital !  Solidarism 
as  against  individualism  which,  being  a  free-for-all 
fight,  was  bound  to  enslave  the  masses !  To  each  man 
•his  product,  or  better  still  perhaps,  like  shares  to  all  lest 
some  perish  by  their  own  hand,  a  victim  of  guiltless  in- 


HISTORISM  191 

feriorlties.  Government  of  a  new  sort,  since  the  old  is 
tlie  antithesis  of  reason!  Or  as  Saint  Simon  put  it: 
Either  government  or  genius,  which  do  you  need  most? 
Will  France  die  when  its  functionaries  of  state  are  buried, 
or  when  the  inventors  and  artificers  cease  producing 
the  wealth  of  nations?  Let  those  who  can  think  pro- 
vide the  answer! 

Soon  after  these  several  onslaughts  upon  hallowed  tra- 
ditions and  moribund  institutions  comes  Sismondi,  the 
first  after  J.  B.  Say  who  voices  the  national  demand  for 
a  clarification  of  economic  theses.  But  unlike  his  prede- 
cessor he  does  not  stop  at  the  point  where  he  begins. 
He  does  not,  after  his  first  essay  on  economics,  continue 
along  the  route  originally  planned.  Events  carry  him 
to  unforeseen  conclusions.  He  changes  front  and  by 
1819,  in  "The  New  Principles  of  Political  Economy"  en- 
ters upon  a  critique  of  dominant  thought  such  as  had 
never  come  from  the  pen  of  any  writer  before.  A  real, 
earnest  attempt  is  made  to  reconstruct  economics.  The 
title  of  the  work  was  not  inaptly  chosen ! 

It  is  the  collectivistic  spirit  that  greets  us  here  and 
gains  our  friendship.  The  tone  is  convincing,  and  the 
treatment  brilliant.  Eloquence  supplies  what  in  cogency 
of  argument  is  here  and  there  lacking.  If  it  were 
not  for  interspersions  distinctly  of  his  own  time,  one 
might  feel  transported  back  to  Kameralism  and  the  ear- 
lier treatises  on  political  science.  For  the  variety  of 
things  discussed  is  endless ;  the  manner  of  exposition  at 
times  careless ;  logical  sequence,  such  as  the  Utilitarians 
had  cultivated,  nowhere  in  evidence. 

Sismondi — to  illustrate  the  scope  and  intent  of  his 
work — gives  us  his  "Principles"  in  seven  Books.  The 
first  expounds  the  question  of  field  and  method;  the  sec- 
ond treats   of  the  origin  a,nd  growth  of  wealth,  of  ex- 


192     THE  DEVELOPMENT  OF  ECONOMICS 

change  and  consumption,  including  a  consideration  of 
the  relation  between  the  distribution  of  wealth  and  pro- 
duction; the  third  part  deals  with  territorial  wealth  as 
incorporated  in  agriculture,  slaves,  etc.  Tenantry,  feu- 
dalism, rents,  and  policies  with  regard  to  them  engage 
our  attention.  In  the  fourth  Book  commercial  wealth 
is  discussed,  particularly  traffic,  markets,  interest,  ma- 
chinofacture,  monopolies,  and  tariffs.  In  the  fifth  we 
find  theories  on  money,  price-levels,  interest,  coinage, 
credit,  and  banking.  The  sixth  takes  up  taxes  and  pub- 
lic loans ;  while  the  last  has  to  do  with  population,  em- 
ployment measures,  and  like  steps  calculated  to  benefit 
the  masses.  At  the  end  of  such  an  enumeration  of  topics 
one  asks :  Could  anything  be  more  ambitious,  or  less 
formal  after  the  rigid  logical  constructions  of  the  Utili- 
tarians ?     Surely  not ! 

But  it  was  not  merely  a  case  of  defiantly  overriding 
the  traditions  of  an  older  school.  Rather,  we  must  give 
credit  also  to  Sismondl  for  his  originality  of  conception 
and  the  completeness  with  which  he  anticipated  the  an- 
nouncements of  socialists.  Indeed,  much  of  what  is  com- 
monly associated  with  HIstorIsm  will  be  found  in  the 
"New  Principles"  where  exuberance  of  fancy  vies  with 
breadth  of  erudition.  Thus  Sismondl  It  was  who  con- 
demns Smith's  unlversalism ;  who  prefers  induction  to 
deduction,  stating  the  historical  argument  at  length; 
who  stresses  the  unity  of  social  processes  of  which  eco- 
nomics represents  but  a  part ;  who  connects  the  latter 
with  art  and  ethics  In  the  belief  that  art  is  more  fruitful 
than  any  bare  account  of  facts  ;  and  who  says :  "Political 
economy  at  Its  widest  is  a  theory  of  charity.  Any  theory 
that  upon  last  analysis  has  not  the  result  of  Increasing 
the  happiness  of  mankind  docs  not  belong  to  the  science 
[of  economics]  at  all." 


HISTORISM  193 

To  Sismondi  public  wealth  is  more  important  than  in- 
dividual income.  Cooperation  is  preferable  to  competi- 
tion, and  this  the  more  so  since  an  unequal  distribution 
of  wealth  has,  as  he  argues,  for  generations  brutalized 
what  otherwise  might  have  been  a  fair  contest.  What 
else,  he  queried,  could  grow  out  of  such  inequitable 
conditions  than  class  consciousness,  the  exploitation 
of  labor  by  capital,  and  periodic  unemployment  due 
to  the  steady  encroachment  of  machinery  upon  manual 
crafts.?  Economics  therefore  had  to  be  restated  in 
conformity  with  historical  and  moral  data ;  or  else  the 
Utilitarian  idea  of  inexorable  laws  dividing  men  into 
task-masters  and  serfs  would  precipitate  a  merciless 
struggle,  a  disaster  indescribable. 

Collectivism  in  England. — Put  differently  then,  Sis- 
mondi was  groping  for  a  theory  of  prosperity;  and  in 
this  he  was  not  alone.  In  England,  too,  even  before 
socialism  was  made  "scientific,"  the  conviction  was  gain- 
ing that  something  was  radically  wrong  with  the  orthodox 
doctrine.  The  French  Revolution  had  set  men  to  think- 
ing, and  furnished  arguments  that  here  and  there  are 
welcomed  by  rebel  economists.  To  free  the  new  science 
from  shackles  of  a  recent  forging,  this  was  their  sincere 
endeavor. 

Godwin  for  instance,  who  had  started  Malthus  on  his 
inquiry  about  population,  was  as  opposed  to  unlimited 
private  property  as  he  was  convinced  of  the  liberality 
of  nature  toward  mankind.  In  his  "Enquiry  Concerning 
Political  Justice  and  Its  Influence  on  Morals  and  Hap- 
piess,"  1793,  he  wrote :  "The  present  system  of  property 
confers  on  one  man  immense  wealth  in  consideration  of 
the  accident  of  birth."  .  .  .  "Hereditary  wealth  is  in 
reality  a  premium  expended  to  retain  mankind  in  bni- 


194     THE  DEVELOPMENT  OF  ECONOMICS 

tality  and  ignorance."  ^  And  further,  "if  luxury  were 
banished,  the  necessity  for  the  greater  part  of  the 
manual  industry  of  mankind  would  be  obviated."  *  So 
here  was  a  program  that  left  little  room  for  the  laissez 
f  aire  of  approved  types !  And  similarly  with  the  writ- 
ings of  economists  like  Thompson,  Hodgskin,  Bray, 
and  Gray  who,  while  not  taken  seriously  by  the  domi- 
nant group,  nonetheless  exerted  a  visible  influence  upon 
economic  philosophy,  especially  on  the  continent.  Again, 
later  on  we  encounter  in  England  such  champions  of 
Christian  or  ethical  economics  as  Carlyle,  Ruskin, 
Kingsley,  and  Maurice;  while  among  Americans  Carey 
might  be  mentioned  as  an  idealistic  protestant  against 
Utilitarianism.  The  approach  to  the  problem  differed 
of  course  according  to  temperament  and  technical  in- 
terests, but  in  general  the  net  result  was  the  same:  It 
was  always  a  cry  against  the  premises  and  principles  that 
Ricardo  had  first  codified  for  the  benefit  of  the  hedonists. 
Collectivism  had  a  vigorous  growth,  even  if  for  the  time 
being  its  reception  was  not  cordial. 

Thus,  to  quote  only  a  few  principal  writers,  Thomp- 
son made  it  his  duty  to  apply  Benthamism  in  the  most 
magnanimous  manner  possible,  by  reasoning  as  follows : 
Maximum  happiness  for  the  largest  number  is  the  nat- 
ural goal.  Any  means  to  this  end  is  justifiable.  Now, 
the  first  condition  to  its  attainment  is  a  possession  of 
goods,  as  Bentham  among  others  had  taken  pains  to  dem- 
onstrate over  and  over ;  and  owing  to  the  equal  capacities 
of  human  beings  to  suffer  or  to  enjoy  themselves,  equal 
income  is  the  first  essential  to  the  attainment  of  the  goal 
set.  Hence  the  need  of  reform  in  general,  and  hence  the 
necessity  of  curtailing  the  privileges  of  the  wealthy !     If 

'Vol.  II,  p.  250. 

•Vol.  II,  ijp.  330  and  344. 


HISTORISM  195 

not  equality,  the  next  best  thing  would  be  income  accord- 
ing to  productiveness ;  but  with  a  redistribution  of  prop- 
erty this  would  of  course  change,  too,  some  having  their 
services  valued  more  highly,  and  others  less  so."* 

Equality,  however,  had  a  physical  aspect  as  well  as  a 
psychological.  Not  only  was  it  true  that  "all  members 
of  society  (cases  of  malformation  excepted)  being  simi- 
larly constituted  in  their  physical  organization,  are  capa- 
ble by  similar  treatment  of  enjoying  equal  portions  of 
happiness,"  ^  but  thought  itself  had  a  basis  admitting  of 
quantitative  measurements.  "What  is  thought  but  mo- 
tion produced  and  felt  in  the  brain.'"'  "What  is  labor  but 
motion  ...  in  cooperation  with  the  ever-active  engines 
of  nature?"  ^  The  odious  comparison  of  intellectual  and 
manual  labors,  it  was  said,  lacked  point  because  all  grades 
of  work  stood  on  a  level  except  for  differences  in  de- 
gree. Hobbes  and  the  French  materialists  were  once 
more  cited  to  substantiate  this  claim.  The  case  for  the 
despised  masses  was  exceedingly  strong  because  science, 
in  a  variety  of  ways,  took  the  ground  from  under  the 
capitalistic    edifice. 

Hodgskin  in  his  lecture  on  "Popular  Political  Econ- 
omy," delivered  in  1826  and  published  the  next  year, 
expanded  this  argument.  He  says  bluntly:  "I  can 
understand  how  a  right  to  appropriate  the  produce  of 
other  men,  under  the  name  of  interest  or  profit,  may  be 
a  stimulus  to  cupidity,  but  I  cannot  understand  how 
lessening  the  reward  of  labor,  to  add  to  the  wealth  of 
the  idle,  can  increase  industry  or  accelerate  the  progress 
of  societ}^  in  wealth."  ^     Again :     "It  is  a  miserable  de- 

*  Thompson,  W.  An  Inquiry  into  tlio  Principles  of  the  Distribution  of 
Wealth  Most  Conducive  to  Human  Happiness  Applied  to  the  Newly  Pro- 
posed  System  of  a  Voluntary  Equality   of  Wealth,   1824,   pp.   5,  586,  594. 

'^  Ibidem,  p.  4.     For  his  view  on  competition  see  p.  369. 

'  Preliminary  Observations. 

'  Page  254. 


196     THE  DEVELOPMENT  OF  ECONOMICS 

lusion  to  call  capital  something  saved.  Much  of  it  is 
not  calculated  for  consumption,  and  never  is  made  to 
be  enjoyed."*  And  further:  "All  capital  is  made  and 
used  by  man,  and  by  leaving  him  out  of  view  and  ascrib- 
ing productive  power  to  capital  we  take  that  as  the 
active  cause  which  is  only  the  creature  of  his  ingenuity, 
and  the  passive  servant  of  his  will."  ^  That  is,  the  Mer- 
cantilists were  right  in  calling  labor  the  father  of  wealth ; 
Smith  did  well  when  he  put  the  emphasis  upon  it  rather 
than  upon  the  soil  as  Physiocratism  was  wont  to ;  but 
the  Utilitarians  committed  a  grievous  mistake  in  adding 
property  rights  to  the  list  of  producers  who  were  en- 
titled to  a  share  of  the  social  dividend.  For  things, 
though  rights  from  a  person's  standpoint,  could  not  be 
agents  themselves,  nor  could  rights  of  their  own  power 
create  what  was  to  be  distributed,  to  wit,  wealth.  Eco- 
nomics, hence,  should  be  redefined  so  as  to  include  more 
than  the  exchange  mechanism,^"  lest  individualistic  norms 
identified  production  too  much  with  an  exercise  of  mere 
legal  rights.  The  possibilities  of  meliorism  were  to  be 
studied  anew  to  give  everybody  a  better  budget.  For, 
we  read  in  Hodgskin's  Lectures :  "The  distress  our  peo- 
ple suffer,  and  the  poverty  we  all  complain  of  is  not 
caused  by  nature,  but  by  some  social  institutions  which 
either  will  not  allow  the  laborer  to  exert  his  productive 
power,  or  which  rob  him  of  its  fruits.  I  can  never  there- 
fore join  those  political  economists  who  seem  to  be  fond 
of  calumniating  nature  in  order  to  uphold  our  rever- 
ence for  the  institutions  of  man."  ^^ 

Karl  Marx  knew  of  these  works  and  used  them  freely. 
He  quotes  them  now  and  then,  and  acknowledges  his  in- 

•  Page  255. 

•  PaRPS  246-47. 
">  Page  23. 

"  Pages  267-68.     Similarly  Gray,  J.     The  Social  System,  a  Treatise  on 
the  Principles  of  Exchange,  1831. 


HISTORISM  197 

debtedness  especially  to  John  Bray  whose  "Labor's 
Wrongs  and  Labor's  Remedy,"  1839,  spoke  strongly  for 
a  productivity  wage.^^  However,  it  would  be  erroneous 
to  suppose  that  the  founders  of  Utilitarian  economics 
were  heartless  sophists  who  cared  nothing  about  public 
welfare.  Their  position  in  truth  was  simply  this :  They 
would  admit  that  their  premises  caricatured  human  na- 
ture and  consequently  misled  reasoners,  but  they  also 
showed  the  essential  resemblance  between  them  and  man 
as  a  type,  while  furthermore  there  was  no  way  of  making 
economics  a  science  except  by  abstracting  in  a  somewhat 
heroic  fashion.  What  was  postulated  by  the  Utilitari- 
ans met  the  facts  of  the  situation  by  and  large;  no  vio- 
lence was  done  to  experience  if  it  was  sufficiently  large. 
Hence,  doubtless,  James  Mill  saw  nothing  ironical  in 
his  statement  that  "the  greatest  possible  happiness  of 
society  is  attained  by  insuring  to  every  man  the  greatest 
possible  quantity  of  the  produce  of  his  labor,"  ^^  the 
measure  of  productiveness  being  understood  to  agree  with 
competitive  conditions.  Yet  his  son  John  Stuart  as  early 
as  1830,  if  one  may  take  his  words  in  the  "Autobiog- 
raphy" seriously,  was  impressed  with  the  flaws  of  "the 
old  political  economy  which  assumes  private  property  and 
inheritance  as  indefensible  facts,  and  freedom  of  produc- 
tion and  exchange  as  the  dernier  Tnot  of  social  improve- 
ment." ^^  We  know  that  he  projected  a  work  on  so- 
cialism and  that  even  in  his  "Principles"  of  1848  he  dis- 
plays deep  sympathy  in  the  struggles  of  the  proletariat. 
His  heart  spoke  against  his  reason.  He  was  the  chief 
formulator  of  the  Utilitarian  logic,  but  at  the  same  time 

"  See.  e.  g.,  Marx's  Poverty  of  Philosophy,  1847,  translated  by  Quelch, 
H.,  pp.  75-82  ;  and  A  Contribution  to  the  Critique  of  Political  Philosophy, 
translated  by  Stone,  N.  I.,  p.  106.  These  and  Marx's  Capital,  as  here 
quoted,  are  Charles  H.  Kerr  &  Co.,  Chicago,  publications. 

"  Essay  on   Government,   in  Encyclopedia   Britannica,   1820,    §   1. 

"Ch.  5. 


198    THE  DEVELOPMENT  OF  ECONOMICS 

packed  into  his  economics  ideas  and  advice  utterly  for- 
eign to  its  premises. 

In  this  respect  the  later  critics  were  more  consistent, 
for  they  made  tabula  rasa  of  the  science,  admitting  noth- 
ing and  calling  for  an  entirely  new  stock  of  materials. 
Thus  Carlyle  penned  his  essays  on  Chartism  and  "Latter 
Day  Pamphlets" ;  thus  Ruskin  made  his  appeal  between 
1860  and  1873,  writing  "Unto  This  Last,"  "Fors 
Clavigera,"  and  "Munera  Pulveris,"  and  still  more.  A 
Christian  kind  of  collectivism  was  preached  that  men  of 
literary  excellence  and  reputation  sponsored  with  all  their 
energy.  Thus  Carlyle  writes :  "In  brief,  all  this  Mam- 
mon-Gospel of  Supply  and  Demand,  Competition,  Laissez 
Faire,  and  the  Devil  take  the  hindmost  begins  to  be  one 
of  the  shabbiest  Gospels  preached ;  or  altogether  the  shab- 
biest." 15 

Economics  was  to  become  an  art  rather  than  a  sci- 
ence. "The  final  object  of  political  economy  ...  is  to 
get  a  good  method  of  consumption  and  a  gi'eat  quantity 
of  consumption ;  in  other  words,  to  use  everything  and 
to  use  it  nobl}'^  wliether  it  be  substance  or  service  or 
service  perfecting  substance."  ^^  Utilitarian  economics 
to  Ruskin  seemed  a  mere  travesty  of  science.  He  wished 
to  expunge  it  forever  from  texts  and  public  records. 
"Observe,"  he  exhorts  us,  "I  neither  impugn  nor  doubt 
the  conclusion  of  the  science  [economics],  if  its  terms 
are  accepted.  I  am  simply  non-interested  in  them,  as  I 
should  be  in  those  of  a  science  of  gymnastics  which  as- 
sumed that  men  had  no  skeleton."  ^^  ]\Ian  was  more  than 
a  machine  for  manufacturing  pleasure,  and  pleasure  had 
other  sources  than  those  laid  bare  by  eighteenth  century 
hedonists. 

"Past  and  Trosent :  Tlio  Workins  Aristocracy. 
"Ruskin,   J.     T'lito  Tliis  Last.   §   70  and   H   77-79. 
"  Page  2.     See  also  Preface  of  Munera  Pulveris. 


HISTORISM  199 

A  like  attitude  had  been  taken  before  also  by  a  few 
German  thinkers,  as  may  be  seen  in  Fichte's  "Closed  Com- 
mercial State,'*  1800,  Thiirnen's  "Isolated  State,"  whose 
terminal  proved  to  be  a  socialistic  regime,  and  again  in 
Gossen*s  remarkable  "Laws  of  Human  Commerce,"  pub- 
lished in  1855.  However,  the  force  of  German  collec- 
tivism, viewed  either  as  a  protest  against  Utilitarianism 
or  as  an  independent  movement  for  economic  uplift,  lay 
not  in  the  chimeras  of  a  Fichte  or  Gossen,  nor  even  in 
the  sober  analysis  of  Rodbertus  who,  for  several  reasons, 
respected  the  rights  of  business  even  when  he  regretted 
their  hardness,  but  in  the  indefatigable  founders  of  "sci- 
entific'* socialism.  Rodbertus,  while  true  to  Ricardo  on 
many  questions,  admitted  the  ruthlessness  of  Utilitarian- 
ism and  notably  in  his  "Letters  to  Kirchmann"  defended 
the  cause  of  labor.  But  his  iron-law  of  wages,  his  theory 
of  the  exploitation  of  the  masses,  his  writings  on  overpro- 
duction and  crises  might  not  have  had  permanent  effects 
if  it  had  not  been  for  the  socialists.  It  was  Marx  and 
Engel3  who  made  capital  out  of  the  jeremiads  of  the 
Prussian  bureaucrat. 

Socialism. — Socialism  in  the  stricter  sense  of  the  word 
was  born  in  1847,  the  year  of  the  Communist  Manifesto 
upon  which  followed  closely,  though  of  course  not  as  an 
effect,  the  Revolution  of  1848.  The  roots  of  the  new 
creed,  however,  must  be  sought  in  French  naturalism, 
whoso  mechanistic  and  materialistic  concepts  Marx  and 
Engels  both  thoroughly  understood  in  spite  of  their 
hostility  to  a  static  concept ;  further  in  British  eco- 
nomics ;  and  still  more  directly  in  Hegel's  metaphysics. 

English  materialism  became  French  during  the  early 
eighteenth  century.  The  Encyclopedists  especially  fa- 
miliarized people  with  the  idea  of  a  mechanism  covering 
not  only  the  physical,  but  also  the  moral  world.     New- 


200    THE  DEVELOPMENT  OF  ECONOMICS 

ton's  system  was  presented  magnificently,  and  with 
greater  lucidity  than  ever  before,  by  Laplace  in  his  "Ce- 
lestial Mechanism,"  which  appeared  at  the  very  end  of 
the  eighteenth  century.  As  has  been  shown  in  an  earlier 
chapter,  the  thought  uppermost  in  the  minds  of  think- 
ers had  been  for  generations  the  harmonizing  of  physical 
laws  with  human  will.  The  principle  of  continuity  had 
been  made  to  render  services  on  behalf  of  students  who 
desired  to  find  a  rational  explanation  of  human  history. 
Law  consequently  had  become  a  by-word  of  experience 
not  only  for  natural  but  likewise  for  social  scientists. 
There  was  nothing  untoward  in  Marx's  annunciation  of 
Determinism. 

Yet  one  is  disposed  to  believe  that  socialism  would  not 
have  had  such  easy  traveling  if  it  had  not  been  for  the 
German  metaphysicians  who  through  Hegel  (G.  W.  F.) 
added  the  link  connecting  materialism  and  historism.  For 
so  far  materialism  had  been  static,  while  socialists  argued 
from  a  dynamic  standpoint.  And  this  is  exactly  what 
Hegel  also  preached.  His  dialectic — itself  an  outgrowth 
of  epistemological  and  psychological  studies — formed  the 
nucleus  of  a  logic  that  purported  to  unify  all  mental 
disciplines  whatsoever.  His  idealistic  keynote,  his  pos- 
tulate of  an  Absolute,  his  acquiescence  in  Prussianism  as 
an  illustrious  instance  of  the  Idea  of  a  State — all  this 
was  but  an  enigma  to  men  like  Marx  and  Engels.  But 
the  old  Heraclitian  concept  of  an  eternal  flux  and  the 
thought  of  the  relativity  of  things  sensed  or  imagined, 
these  were  readily  understood.  What  Hegel  had  said 
about  thesis,  antithesis,  and  synthesis  in  his  attempt  at 
a  logical  interrelation  of  knower  and  the  known,  and  what 
he  himself  had  developed  in  other  fields,  ending  with  an 
ingenious  philosophy  of  history,  this  others  determined 
to  use  for  an  appreciation  of  present  and  future. 


HISTORISM  201 

Socialism  had  no  need  of  a  teleological  outlook.  Con- 
ditions seemed  to  demand  attention  not  on  the  part  of  the 
gods,  but  on  the  part  of  men  who  knew  what  they  wanted 
and  who  could  cheerfully  come  to  the  assistance  of  nature 
by  precipitating  what  eventually  would  happen  anyhow. 
In  this  spirit,  then,  the  dialectic  of  individual  learning 
was  elevated  to  a  world  principle  of  history.  Hegelian- 
ism  was  stripped  of  its  metaphysics,  but  the  principle  of 
relativity,  of  change  everlasting,  of  the  interaction  of 
tilings  in  a  steady  progression  from  past  to  future, — 
this  was  left  undisturbed.  As  Engels  wrote  in  his  "Anti- 
Diihring"  a  generation  after  socialism  had  been  formally 
launched :  In  Hegel's  system  "for  the  first  time  the  whole 
natural,  historic,  and  intellectual  world  was  presented  as 
a  process,  that  is  as  engaged  in  motion,  perpetual  change, 
transformation,  and  development.  .  .  .  Viewed  from  this 
standpoint  the  history  of  mankind  no  longer  appeared  as 
a  wild  tangle  of  senseless  deeds  of  violence  .  .  .  which  it  were 
best  to  forget  as  soon  as  possible,  but  as  a  principle  of 
the  development  of  mankind,  whose  gradual  march 
through  all  its  stray  paths,  and  its  eternal  law,  through 
all  its  seeming  fortuitousness  it  now  became  the  task  of 
the  intellect  to  trace  and  discover."  ^^  This  historical 
concept  it  was  precisely  that  the  older  revolutionary  gos- 
pel of  communism  had  lacked.  Facts  apparently  inex- 
plicable became  as  clear  as  daylight  once  they  were  sum- 
marized into  a  series  of  interrelated  events  tending  toward 
a  definite  issue. 

A  common  sense  view,  furthermore,  was  taken  of  this 
unceasing  change  of  things.  Experience  was  the  guide, 
and  authority  a  mere  mirror  of  experience  per  given 
time  and  place.      The  world  was  real  for  all  the  fleeting- 

'*  Socialism.  Utopian  and  Scientific,  pp.  85-8G  (Ch.  H.  Kerr  &  Co., 
1917),  transl.  by  Aveling.  E.  See  also  the  same  author's  Anti-Duehring, 
p.  10.  and  his  essay  on  Feuerbach,   L.    (Kerr  &  Co.). 


202    THE  DEVELOPMENT  OF  ECONOMICS 

ness  of  life.  What  was  outside  did  not  originate  within, 
as  Hegel  believed,  but  on  the  contrary  our  ideas  were 
a  picture  of  an  original  all  about  us.  Thus  Marx  could 
write  in  his  "Contribution  to  the  Critique  of  Political 
Economy,"  1859:  "The  concrete  thing  continues  to  lead 
an  independent  existence  after  it  has  been  understood, 
just  as  it  did  before,  outside  of  the  head.  .  .  ."  ^^ 
Knowledge  therefore  did  not  change  by  the  bare  process 
of  our  finding  out,  but  it  became  a  definite  asset  for  men 
to  acquire  if  they  cared. 

And  what  sort  of  knowledge  could  be  gleaned  from  his- 
tory as  regards  its  inner  meaning?  Well,  primarily  this, 
that  all  non-economic  phenomena  changed  with  the  eco- 
nomic, these  latter  being  the  cause  or  determinant  in  a  real 
sense  of  the  word.  "The  sum  total  of  these  relations  of  pro- 
duction," Marx  tells  us  in  that  oft-quoted  passage  which 
no  one  can  afford  to  overlook  who  wishes  to  understand 
either  the  philosophical  or  the  economic  groundwork  of 
socialism,  "the  sum  total  of  these  relations  of  production 
constitutes  the  economic  structure  of  society  .  .  .  the  real 
foundation  on  which  arise  legal  and  political  superstruc- 
tures, and  to  which  correspond  definite  forms  of  social 
consciousness.  The  mode  of  production  in  material  life 
determines  the  general  character  of  the  social,  political, 
and  spiritual  process  of  life.  It  is  not  the  conscious- 
ness of  men  that  determines  their  existence,  but  on  the 
contrary  their  social  existence  determines  tlieir  conscious- 
ness." ^^  And  so  on.  On  this  account  private  property 
could  be  made  dependent  upon  the  economic  organization 
of  society.  What  was  once  self-evident  might  later  be- 
come mysterious,  nay,  an  anachronism  not  to  be  tolerated. 
Legal  ideas  on  wealth  would   change  sooner  or  later  as 

"  p.  203. 

"  Ibidom,  pp.  11-12.  Sec  also  Engel's  Socialism,  Utopian  and  Scien- 
tific,   Introduction. 


HISTORISM  203 

modes  of  production  changed.  The  emergence  of  a  pro- 
letariat might  render  unfit  for  use  a  sot  of  laws  admirable 
enough  when  first  introduced.  Or  in  the  words  of  Las- 
salle,  whose  "System  of  Acquired  Rights,"  1862,  was 
hardly  less  noteworthy  a  contribution  to  socialistic  liter- 
ature than  his  labors  as  an  organizer  of  men :  "Just 
because  every  age  is  autonomous,  no  age  can  be  subject 
to  the  domination  of  another,  and  no  age  is  bound  to 
permit  the  continuance  as  right  of  anything  that  con- 
tradicts its  own  consciousness  of  right,  or  seems  to  it 
to  be  wrong." 

Socialistic  economics,  in  short,  was  based  on  a  theory 
of  progress  radically  different  from  the  utilitarianism  of 
the  Benthamites.  Orthodox  economics,  in  England  and 
elsewhere,  talked  of  utility,  happiness,  human  foibles  and 
an  ever-recurrent  sequence  of  cause  and  effect,  through 
which  rates  of  return,  price,  and  income  should  gain 
validity  and  precision.  The  socialists  on  the  other  hand 
took  a  long-time  view  and  showed  how  society  as  a  whole 
moved  steadily  on,  the  individual  not  counting  at  all, 
nor  will  nor  tinith,  Avhich  was  as  inconstant  as  the 
social  environment  whence  it  sprang.  To  be  consistent, 
therefore,  the  founders  of  socialism  should  have  foregone 
a  right  to  interfere  in  the  course  of  events ;  but  speaking 
as  individuals  they  admitted  the  possibility  of  accelerat- 
ing a  natural  trend.  Hence  the  economic  doctrine ;  and 
hence  the  rejection  as  stupid  and  selfish  of  the  Utilitarian 
premises.  Not  private  property,  but  public  welfare! 
Not  capital,  but  labor  as  the  decisive  element  in  busi- 
ness !  Not  exploitation  that  must  degrade  the  masses, 
but  development  of  men  through  control  of  social  sur- 
roundings. 

Competitive  concepts  thus  lost  their  merit.  The  legal 
postulates  were  for  the  most  part  condemned  or  quali- 


204    THE  DEVELOPMENT  OF  ECONOMICS 

fied;  the  psychological,  and  in  so  far  as  recognized,  sub- 
ordinated to  the  function  of  training  under  public  as  well 
as  private  guidance.  Instead  of  value,  wealth ;  instead 
of  factorial  shares,  personal  income;  instead  of  diminish- 
ing returns,  a  reapportionment  of  the  funds  now  con- 
centrated in  the  hands  of  a  few ;  instead  of  maximum  pro- 
duction, hygienic  consumption  and  self-realization ;  ^^  in- 
stead of  class  conflicts,  international  solidarity.  Such 
were  the  ideals  of  the  socialistic  economics  which,  derived 
from  an  ever-active  law  of  progress,  aimed  at  the  sub- 
version of  the  existing  order. 

The  socialists,  somewhat  after  the  manner  of  Saint 
Simon,  but  relying  more  upon  the  arguments  of  Ricardo, 
Kodbertus,  and  truants  like  Hodgskin,  applied  their 
economic  interpretation  of  history  to  current  customs. 
They  wished  to  show  how  value  was  caused  and  measured 
by  labor.  They  resented  the  spoliation  of  the  many  by 
the  few.  They  traced  unemployment  and  pauperism 
back  to  machine-production  and  the  resulting  periodic 
panics.  They  predicted  the  demise  of  capitalism  by  sui- 
cide, as  it  were,  that  is  as  something  sure  to  end  pre- 
maturely because  of  the  methods  employed  by  the  entre- 
preneur in  crushing  his  weaker  rivals.  Economic  in- 
dividualism was  sure  to  perish,  it  was  said;  science 
and  concerted  action  could  only  precipitate  the  end. 
Subsistence  wages  would  then  disappear,  and  inven- 
tion promote  a  cordial  partnership  between  all  grades 
of  labor.  For,  as  Hodgskin,  Bray  and  others  had  re- 
marked: All  kinds  of  labor  differed  only  in  degree  of 
effectiveness.  Labor  alone  could  create  wealth.  "All 
economic  goods,"  according  to  Rodbcrtus,  "are  sim- 
ply   the    result    of    labor.      Tlieir    cost    is    purely    labor- 

"  See  for  instance  Marx's  Critique  (if  I'ulitical  Eeuooiuy,  \).  '2~'J. 


HISTORISM  205 

cost.''  "^  .  .  .  "That  which  determines  the  magnitude  of 
the  value  of  any  article,"  wrote  Marx  in  his  "Capital," 
1867,  "is  the  amount  of  labor  socially  necessar}'*'  .  .  . 
"to  produce  an  article  under  the  normal  conditions  of 
production,  and  with  the  average  degree  of  skill  and  in- 
tensity prevalent  at  the  time."  And  "each  individual 
commodity  ...  is  to  be  considered  as  an  average  sample 
of  its  class."  ^^ 

As  for  capital  it  "does  not  consist  in  the  fact  that 
accumulated  labor  serves  living  labor  (-power)  as  a 
means  for  new  production.  But  it  consists  in  the  fact 
that  living  labor  serves  accumulated  labor  as  the  means 
of  preserving  and  multiplying  its  exchange-value."  ^^ 
Property  rights,  that  is  to  say,  bring  riches  where  none 
should  be.^^  A  social  relation  is  abused  and  made  sub- 
servient to  vile  motives  destructive  of  the  social  fabric. 
Nothing  can  save  the  expropriated  multitudes  except 
a  universal  law  whose  workings  are  clear  to  any  im- 
partial mind.  The  value  of  economic  analysis  is  its 
ability  to  gather  under  one  formula  myriads  of  par- 
ticulars which,  for  any  given  moment  of  time,  must  seem 
senseless.  Economics,  in  fine,  is  the  science  of  wealth- 
phenomena  as  history  reveals  them,  the  fundamentals  of 
human  nature  and  the  virtues  or  truths  of  the  day  being 
intelligible  in  no  other  way.  What  is  regular  is  the  de- 
pendence of  all  human  expressions  upon  an  economic  sub- 
stratum.    The  rest  is  of  no  consequence. 

Relation  of  Socialism  to  Historical  School  of  Eco- 
nomics.— Historism  in  the  narrower  sense  of  the  term 
agreed  with  this  main  point  of  the  "scientific"  socialists. 

"  Letters  to  Kirchniann,  1850. 

"  Vol.  1,  p.  4fi.  For  earlier  expressions  of  like  tenor  see  Marx's 
Poverty  of  Pliilosophy. 

-*  Marx.  K.  Waf;<'s.  Labor,  and  Capital,  publication  of  Ch.  H.  Kerr  & 
Co..   Chicago,    pp.    3()-37   and    41. 

=^  Capital   (Kerr  publication  in  three  volumes),  voL  1,  p.  342. 


206    THE  DEVELOPMENT  OF  ECONOMICS 

It  was  maintained  from  the  first  that  the  laws  of  social 
science  should  be  built  out  of  data  scattered  over  a  large 
period  of  time,  the  circumstances  and  names  varying, 
but  the  relations  observing  definite  principles  which  could 
be  discovered  the  more  surely,  the  more  numerous  the 
facts  compared.  The  Historical  economists,  in  their  own 
words,  wanted  an  historical  interpretation  of  economics, 
just  as  the  socialists  wanted  an  economic  interpretation 
of  history.  The  former  took  the  unity  of  the  economic 
process  for  granted,  but  desired  to  explain  its  meaning 
by  the  comparative  method ;  the  latter  started  with  a 
general  historical  concept,  and  hoped  to  find  in  one  as- 
pect the  clew  to  all  others.  The  difference  is  great  and 
hardly  suggested  by  the  phrases  which  sound  somewhat 
alike;  however  resemblances  exist  nonetheless  and  His- 
torism  without  collectivism  of  the  socialist  sort  would 
have  been  an  odd  product,  a  flash  out  of  the  clear  sky 
that  one  can  imagine  but  has  not  seen. 

Of  course,  it  is  easy  to  exaggerate  the  intellectual  af- 
finity between  socialism  and  Historism,  as  men  from  both 
camps  have  pointed  out  in  a  spirit  of  self-defense.  There 
is  no  doubt  that  Historism  was  national,  while  socialism 
aimed  at  internationalism.  Again,  the  former  made  no 
pretense  of  having  discovered  the  formula  of  which  all 
individual  economic  laws  should  be  but  illustrations,  a 
claim  made  early  by  Marx  and  Engels  and  upon  which, 
in  addition,  they  grounded  their  demand  for  socio-eco- 
nomic reform.  And  once  more,  much  of  the  Utilitarian 
economics,  in  substance  no  less  than  in  form  and  nomen- 
clature, was  adopted  by  the  Historical  School,  the  de- 
partures being  due  to  a  rather  typically  German  interest 
in  Kameralism  and  foreign   policies. 

But  hardly  anything  of  the  Ricardian  scheme  could 
suit  the  founders  of  socialism.     It  was  not  to  expound 


HISTORISM  207 

the  laws  of  science  that  they  quoted  the  British  ortho- 
dox writers,  but  in  an  endeavor  to  refute  them,  to 
expose  to  ridicule  the  ar^ments  of  capitalism,  or  to 
stigmatize  these  cold-blooded  treatises  as  a  mere  de- 
ception of  the  common  people.  In  view  of  such  marked 
opposition  between  the  two  groups  on  a  number  of  counts 
it  would  be  an  injustice  to  couple  them  too  closely.  How- 
ever, there  remains  the  fact  that  they  united  in  a  con- 
demnation of  the  individualistic  regime  and  meant  hon- 
estly to  create  a  new  science  of  society.  Historism  no 
less  than  socialism  was  intent  upon  framing  laws  of  re- 
form conformable  to  a  general  theory  of  prosperity. 
Economics  was  to  have  practical  bearings.  The  ethical 
norms  were  to  receive  due  care.  The  past  with  its  mis- 
takes was  to  enlighten  the  future.  New  standards  of 
manhood  from  a  new  knowledge  of  human  nature!  A 
wider  outlook  for  a  more  specific  purpose !  Applications 
in  politics  which  to  a  Utilitarian  economist  could  only 
seem  needless  or  contrary  to  laws  eternal. 

Historism  borrowed  some  of  its  ideas  from  socialistic 
economics  in  order  to  accomplish  these  cherished  tasks. 
Its  literature  abounds  in  references  and  allusions  to 
works  and  ideas  found  in  French  collectivistic  writings, 
in  utopianism,  and  in  the  works  of  Karl  INIarx  or  his 
disciples.  Not  by  accident  German  Historism  culminated 
in  the  founding  of  the  League  for  Social  Reform,  in 
1873 !  Hardly  sui"prising  that  the  Socialists  of  the 
Chair  in  the  universities  were  in  close  touch  with  the 
Historical  group ;  or  that  the  same  fusion  of  sociology 
and  economics  noticeable  in  Marx  also  serves  as  a  corner- 
stone of  Historism!  When  utopianism  became  "scien- 
tific," theorems  had  to  be  announced  that  Roscher  and 
Knies  could  ill  afford  to  neglect. 

Roots  of  Historism. — Yet  the  outstanding  note  of  His- 


208    THE  DEVELOPMENT  OF  ECONOMICS 

torism,  namely  its  historical  mindedness,  was  not  sounded 
first  by  the  socialists.  It  antedated  their  campaign  by 
a  century  or  more.  It  goes  back  to  a  philosophy  of  life 
originally  derived  from  metaphysical  questions,  and 
gradually  made  to  converge  upon  a  single  field:  The  his- 
tory of  society.  Vico  in  1725  had  published  his  "Prin- 
ciples of  a  New  Science"  in  this  spirit.  The  works  of 
Montesquieu,  Voltaire,  Turgot,  Condorcet,  and  Condillac 
continued  the  search  for  a  law  of  progress,  English  and 
German  writers  developing  a  science  of  history-writing 
whose  excellence  has  since  inspired  other  nations.  In 
England  Gibbon  gave  to  the  world  the  first  volume  of  his 
"Dechne  and  Fall  of  the  Roman  Empire"  in  1776,  the 
year  that  Smith  published  the  "Wealth  of  Nations,"  and 
Bentham  his  "Fragment  on  Government."  In  Geinnany 
Lessing  wrote  on  the  "Education  of  the  Human  Race," 
1780,  while  Herder  soon  after^vards  began  his  "Ideas  on 
a  Philosophy  of  the  History  of  Mankind."  What  with 
the  labors  of  the  professional  historians,  whose  publica- 
tions set  a  new  standard  of  research  at  the  turn  of  the 
eighteenth  century,  and  the  philosophical  works  of  Kant, 
Goethe,  Fichte,  the  two  Schlegels,  and  Krause,  whose 
"True  Lesson  and  Philosophy  of  the  History  Applicable 
to  a  Science  of  Right  Living"  (1815-25),  appealed  to 
large  audiences,— what  with  this  fostering  on  all  sides 
of  the  historical  outlook  its  application  to  economic  prob- 
lems miglit  have  been  expected.  In  France  economics  and 
liistory  had  already  been  combined  by  Sismondi  and 
Cousin,  the  latter  a  Hegelian  who  on  his  return  from 
Berlin  infused  new  vigor  into  French  philosophy.  Buchez 
wrote  one  of  the  first  popular  books  on  tlie  science  of 
historiography  in  1833,  while  Guizot,  Micliclet  and 
Thierry  wrote  masterpieces  that  brought  the  past  back 


HISTORISM  209 

to  life  again,  a  guide  for  the  present,  a  mirror  in  which 
to  read  the  soul  of  Frenclimen  great  and  little. 

And  then  there  was  Conite,  the  founder  of  social 
physics  or  sociology,  as  he  later  christened  it.  Comte, 
who  had  epitomized  history  in  his  three  stages  of  devel- 
opment, the  theological,  metaphysical,  and  positive  or 
scientific,  and  in  whom  the  idea  of  continuity,  interaction, 
and  human  control  governed  everything  else.  In  place 
of  divine  guidance,  the  will  of  man !  As  an  improvement 
on  intuition,  reason  armed  with  knowledge !  l?or  the  sake 
of  progress,  one  social  science  resting  on  all  others,  but 
to  be  perfected  only  by  exhaustive  inquiry  into  social 
phenomena  past  and  present. 

German  Historism  had  these  thoughts  and  works  to 
fall  back  on  for  a  systematization  of  its  own  concepts. 
It  was  surrounded  by  men  who  studied  and  taught  his- 
tory in  and  out  of  university.  The  followers  of  Niebuhr 
and  Ranke,  Savigny  and  Eichhorn,  Bopp,  and  the 
brothers  Grimm,  of  Schlegel  and  Hegel  furnished  invalu- 
able material  for  an  historical  approach  to  economic  sub- 
jects. Besides,  the  evolutionary  viewpoint  was  rapidly 
making  headway.  The  biological  aspects  were  worked 
out  by  Lamarck  and  Agassiz,  Alexander  von  Humboldt 
and  Erasmus  Darwin,  whose  son  Charles  started  on  his 
memorable  voyage  aboard  the  "Beagle"  in  1831.  In 
1855  H.  Spencer  and  A.  Wallace  announced  some  of  the 
ideas  basic  to  all  evolutionary  thinking,  and  four  years 
later  appeared  Charles  Darwin's  "Origin  of  Species," 
the  result  of  thirty  years  of  research  in  many  climes. 

Economic  Historism  was  an  offspring  of  tliis  larger 
movement  for  a  dynamic  interpretation  of  life,  though 
it  may  and  has  been  denied  that  the  example  of  the 
German   jurists    Eichhorn    and    Savigny    exercised    any 


210    THE  DEVELOPMENT  OF  ECONOMICS 

direct  influence  over  it.^  The  idea  of  a  change  of 
beliefs  or  of  institutions,  and  of  the  environmental 
basis  of  all  theory  did  not  at  any  rate  have  to  be 
taken  from  the  German  professors  either  at  Gottingen 
or  elsewhere,  for  as  shown  the  data  had  long  been 
accumulating  on  the  continent,  and  to  a  certain  ex- 
tent in  England.  It  remained  only  to  organize  various 
reactions  against  the  static  Utilitarian  or  Naturalistic 
economics  into  a  creed  at  once  intelligible  to  the  gen- 
eral public  and  satisfactory  from  a  methodological 
standpoint.  And  this  the  Historical  group  of  German 
economists  undoubtedly  tried.  They  improved  vastly  on 
the  half-historical  attempts  of  Galiani,^^  the  critic  of 
the  Physiocrats,  and  of  later  French  writers  like 
Ganilh.^*  They  profited  by  the  Romantic  school  of  lit- 
erateurs  and  philosophers  whose  fervid  devotion  to  things 
medieval  has  a  parallel  only  in  the  philological  field 
where  laws  of  growth  and  semantic  changes  gave  a  new 
meaning  to  modern  language.  Roscher,^*^  the  acknowl- 
edged pioneer  in  economic  Historism,  credits  German 
economists  like  Krause,  G.  F.,  Rau,  H.,  Baumstark,  E., 
and  Schmitthemner,  F.,  with  the  initial  move  toward  the 
new  construction. 

Friedrich  List,  whose  "National  System  of  Political 
Economy"  came  from  the  press  in  1841,  but  was  con- 
ceived and  planned  during  the  preceding  decade,  was 
an  advance  agent  for  the  Historical  cause,  fortifying 
his  arguments  for  nationalistic  economics  and  commercial 

"  For  instance  by  Menger,  C,  in  his  Untersucbungen  iiber  die  Metliode 
der  Sozialwissenscliaft.  1883,  pp.  209-12. 

='  Dialogues  t-ur  le  Cominorce  des  B16s,  1770.  Galiani  was  Neapolitan 
minister  at  Paris. 

-'  Inquiry  into  the  Various  Systems  of  Political  Economy  ....  one 
of  the  first  topically  arranged  histories  of  economic  thouglit,  with  critical 
commentary  on  A.  Smith's  Wealth  of  Nations,  edition  of  1812,  trnnsl.  by 
Boileau,    I). 

'"  Crundriss  zu  Vorlesungen  iiber  die  Staatswissenschaft  nach  Ge- 
schichtlicher  Methodc,  1843. 


HISTORISM  211 

protection  with  innumerable  references  to  past  theories 
and  practices. 

He  opens  his  book  with  a  survey  of  economic  develop- 
ments in  different  European  countries,  and  is  not  igno- 
rant of  economic  doctrines  from  Mercantilism  on. 
"History  teaches  us,"  he  says,  "how  nations  which  have 
been  endowed  by  Nature  with  all  resources  which  are 
requisite  for  the  attainment  of  the  highest  grade  of  wealth 
and  power,  may  and  must — without  on  that  account  for- 
feiting the  end  in  view — modify  their  systems  according 
to  the  measure  of  their  own  progress.  .  .  ."  ^^  Cosmo- 
politanism and  Malthusianism  both  were  rejected  as  un- 
true to  facts.  The  historical  criterion  Avas  definitely 
brought  forward  as  alone  adequate  for  sound  economic 
analysis.  "The  present  state  of  the  nations,"  we  read, 
"is  the  result  of  the  accumulation  of  all  discoveries,  in- 
ventions, improvements,  perfections,  and  exertions  of  all 
generations  which  have  lived  before  us ;  they  form  the 
mental  capital  of  the  present  human  race.   .   .   ."  ^^ 

As  happens  so  frequently  then,  in  this  case,  too,  credit 
is  given  to  the  wrong  man.  There  is  not  a  great  deal 
in  Historism  that  List  had  not  presaged  in  his  modest, 
though  enthusiastically  received,  pica  for  German  in- 
dustrialism. Utilitarian  universalism,  materialism  (in 
the  ordinary  sense,  meaning  egoism  and  indifference  to 
the  higher  non-economic  values  of  life),  individualism 
and  narrowness  of  treatment,^-  these  were  the  defects 
mainly  attributed  by  Historism  to  the  current  economic 
system,  and  these  List  pointed  out  several  years  before 
Roscher  published  the  first  part  of  his  "Principles  of 
Political  Economy"  in  1843.  We  are  told  of  economic 
stages  from  hunting  to  machinofacture,  of  the  interrela- 

»"  Translation  by  Lloyd,  S.  S.,  edit,  of  1904,  Book  I,  ch.  10. 

"  Ibidem,  Book  II,  ch.  12. 

"  Ibidem,  Book   II,   ch.   15,  beginning. 


212    THE  DEVELOPMENT  OF  ECONOMICS 

tion  of  all  social  events,  of  the  absurdity  of  wealth- 
measurements  from  an  individual  viewpoint  only,  of  the 
difference  between  rights  to  income  and  concrete  wealth, 
of  the  priority  of  public  over  personal  rights,  of  the 
need  of  inference  from  the  facts  of  life,  the  best  book 
on  economics  being  "actual  life,"  and  of  the  necessarily 
national  character  of  doctrines,  be  they  economic  or 
not.  Commercial  restrictions,  for  instance,  are  to  List 
"not  so  much  the  inventions  of  mere  speculative  minds, 
as  the  natural  consequences  of  the  diversity  of  interests, 
and  of  the  strivings  of  nations  after  independence  or 
overpowering  ascendancy  .  .  .  and  therefore  cannot  be 
dispensed  with  until  this  conflict  of  national  interests 
shall  cease,  in  other  words  until  all  nations  can  be  united 
under  one  and  the  same  system  of  law."  ^^  Again,  the 
British  system  failed  because  "at  bottom  it  is  nothing 
else  than  a  sj'stem  of  the  private  economy  of  all  the 
individuals  of  the  whole  human  race,  as  that  economy 
would  develop  and  shape  itself  under  a  state  of  things 
in  which  there  were  no  distinct  nations,  nationalities,  or 
national  interests — no  distinctive  political  constitutions 
or  degrees  of  civilization — no  wars  or  national  animosi- 
ties. So  it  is  nothing  more  than  a  theory  of  values ;  a 
mere  shopkeeper's  or  individual  merchant's  theory — not  a 
scientific  doctrine  showing  how  the  productive  powers  of 
an  entire  nation  can  be  called  into  existence,  increased, 
maintained,  preserved — for  the  special  benefit  of  its 
civilization,  welfare,  might,  continuance,  and  indepen- 
dence." ^* 

Doctrines  of  Historism. — Here  certainly  we  are  re- 
minded of  facts  that  Historism  later  built  into  systems  of 
national  economy.     Economics  by  Roscher,  Hildcbrand, 

"  Ibidfm,  Book  I,  ch.  10. 
"Ibidem,    Book   III,    ch.   31. 


HISTORISM  213 

Knies  and  their  followers  up  to  the  dawn  of  the  present 
century  was  grounded  on  the  principle  of  historical  con- 
tinuity and  repetition.  It  became  the  "science  which  has 
t6  do  with  laws  of  development  of  the  economy  of  a 
nation."  ^^  It  blossomed  out  into  a  philosophy  of  history 
in  which  successive  stages  of  economic  organization  and 
living  were  to  divulge  the  secrets  of  social  life.^^  Like 
socialism  Historism  reckoned  by  epochs,  the  economic 
data  of  each  providing  the  key  to  the  solution  of  many 
other,  if  not  all  other,  problems.  And  more  particularly, 
as  Knies  put  it  in  his  "Political  Economy  from  the  His- 
torical Standpoint"  (the  first  edition  of  which  appeared 
in  1853)  :  "The  historical  interpretation  of  economics 
rests  on  the  belief  that  economic  theory  is  a  product  of 
development,  is  intertwined  with  the  whole  social  organism 
of  any  given  time  and  place  and  its  circumstances,  gets 
its  arguments  from  the  historical  background,  leads  to 
periodically  changing  solutions — though  it  is  a  progres- 
sive manifestation  of  truth — remains  imperfect  in  sum 
and  character,  and  always,  even  when  accepted  as  abso- 
lute ti'uth,  illustrates  merely  the  general  historical  prin- 
ciple of  the  spirit  of  the  times."  ^^ 

In  this  vein  Leslie,  the  Irish  economist,  could  write: 
Only  the  historical  method  can  reveal  laws  of  evolution. 
"Every  successive  phase  of  social  progress  presents  insep- 
arably connected  phenomena  to  the  observation  of  the 
economist,  jurist,  the  mental,  the  moral,  and  the  political 
philosopher."  ^^     With  impressive  unanimity  the  Histori- 

'=  Roscher.  W.,  Principles  of  Political  Economy,  transl.  by  Lalor,  J.  J., 
from  the  13th  German  edition,  vol.   1.   ch.  2,   §   16. 

^"  See  Ilildebrand,  B.,  in  Jahrbiicher  fiir  National  okonomie  und 
Statistik,   for   Lsti-'i,  vol.   1. 

"  Pages  24-5  of  Politische  okonomie  vom  Geschichtlichen  Standpunkt, 
1881-83. 

'*  Leslie,  Th.  E.  C,  Essays  on  Political  Economy,  pp.  189-90.  See 
also  Schoenberg,  G.,  Die  Volkswirtschaft  der  Gegenwart,  1869,  p.  38. 
For  a  recent  attempt  at  a  summarizing  of  the  essentials  of  human  history 
see  Loria,  A.,  Economic  Synthesis,  transl.  by  Paul,  M.  E.,  1914. 


214    THE  DEVELOPMENT  OF  ECONOMICS 

cal  group  in  England,  Germany,  and  Italy  agreed  on 
these  fundamentals  of  economic  analysis.  Centuries  of 
history  were  to  show  what  introspective  psychology  could 
not. 

Historism  thus  took  a  sociological  view  of  human 
nature.  It  declined  to  rest  content  with  speculations 
privately  conducted.  It  looked  for  a  unit  larger  than 
the  individual  and  found  it  in  the  society  of  all  ages. 
Saint  Simon  and  Comte  had  first  used  this  conception 
for  the  elaboration  of  a  theory  of  progress.  The  latter 
especially  had  emphasized  the  force  of  ideas  as  opposed 
to  man's  subjection  to  physical  environment.  He  that 
left  psychology  and  economics  out  of  his  classification 
of  sciences  was  most  instrumental  in  having  them  recog- 
nized as  essentials  for  his  own  science,  sociology !  Society, 
he  taught,  was  a  single  unit  reflecting  in  its  laws  of 
statics  and  dynamics  the  Newtonian  laws  of  motion. 
Nothing  could  be  plainer  than  that  the  heterogeneity  of 
events  was  reducible  to  homogeneity  of  law.  For  were 
not  all  parts  interdependent  as  in  an  organism?  Was 
not  society  really  a  body  politic  as  Aristotle  had  divined 
and  Hobbes  picturesquely  described  it? 

The  organic  nature  of  society  and  of  the  state  seemed 
to  find  support  notably  in  statistics  as  developed  about 
this  time.  From  small  beginnings  in  the  previous  century 
this  branch  of  investigation  had  grown  to  large  propor- 
tions due  directly  to  official  records  and  indirectly  to 
individual  speculations  on  probability  and  law.  The 
studies  of  Fermat  and  Bernouilli  were  supplemented  by 
such  works  as  Laplace's  "Philosophical  Essay  on  Proba- 
bilities," 1814,  and  Cournot's  "Discourse  on  the 
Theory  of  Chance  and  Probability,"  1813.  The  Italian 
economist  Gioja  had  in  1826  published  his  "Philosophy 
of  Statistics,"  and  A.  A.  Knies  in  Germany  his  "Statistics 
as  an  Independent  Science"  about  the  middle  of  the  nine- 


HISTORISM  215 

teenth  century.  Governments  had  established  skitistical 
bureaus  with  more  or  less  well-defined  duties,  methods, 
and  machinery  for  work ;  and  in  the  genius  of  La  Grange, 
Gauss,  and  the  Belgian  Quetelet  the  statistical  method 
found  authoritative  expression  that  economics  was  not 
likely  to  forget.  Wagner  indeed,  one  of  the  foremost 
German  economists  of  the  later  Historical  group,  opened 
his  professional  career  with  a  book  on  "Regularity 
(Gesetzmassigkeit)  in  .   .   .  Human  Actions,"  1864. 

But  it  was  Quetelet  who  gave  the  science  of  statistics 
— if  one  may  for  the  moment  grant  the  possibility  of 
such  a  science — a  solid  foundation.  His  "Treatise  on 
Man,"  1835,  was  translated  into  German  as  early  as 
1838,  and  into  EngHsh  in  1842.  His  "Letters  on  the 
Theory  of  Probabilities"  cause  widespread  comment,  and 
his  "Social  System  and  the  Laws  Regulating  it"  ap- 
peared in  Gennan  dress  by  1856.  He  chose  as  his  life 
work  the  inquiry  Into  those  "causes,  whether  natural  or 
abnormal,  which  influence  human  development ;  to  en- 
deavor to  measure  the  influence  of  these  causes,  and  the 
mode  according  to  which  they  mutually  modify  each 
other."  ^^  He  felt  that  economics  might  deal  with  hu- 
man regulations  designed  to  further  progress,  but  that 
social  physics,  I.  e.,  sociology  and  statistics,  would  voice 
the  wish  of  God,  no  matter  what  the  nature  of  disease  or 
crime.  For  "moral  phenomena,  when  observed  on  a  great 
scale,  are  found  to  resemble  physical  phenomena,"  '^^  and 
society,  "this  vast  body,  exists  thanks  to  laws  of  nature 
like  everything  else  from  the  hand  of  the  Great  Creat- 
or." ^^  He  insisted  that  society  "Is  as  much  a  piece  of 
physiology  as  individual  man  himself."  ^^  Regularity 
therefore  had  a  reason  In  facts  of  analogy  as  well  as  a 

"  Treatise  on  Man.  transl.  into  Englisli  in  1842,  p.   8. 

*"  Ibidem,  Introduction. 

*'  Lettres  sur  la  Theorie  des  Probabilit6s. 

"  Ibidem. 


216    THE  DEVELOPMENT  OF  ECONOMICS 

source  of  verification  in  a  science  of  averages  whose 
accuracy  would  be  the  greater,  the  larger  the  number  of 
events  taken  into  consideration. 

Now  this  idea  of  interaction  at  all  points,  of  law 
superseding  freedom  of  will  as  ordinarily  understood, 
served  Historism  in  good  stead,  giving  a  semblance  of 
truth  not  only  to  the  organic  theory  of  society,  but  also 
to  the  contention  that  economics  was  an  inseparable  part 
of  sociology.  We  find  therefore  Roscher  declare  in  his 
"Principles  of  Political  Economy":  "Our  task  is,  so  to 
speak,  the  anatomy  and  physiology  of  social  or  national 
economy."  ^^  The  physiological  viewpoint  necessitated 
an  inductive  method  and  justified  a  reliance  upon  statis- 
tics. In  Knies  the  same  idea  of  an  immensely  complex 
process  of  interactions  between  individuals  recurs  again 
and  again.  Society  as  an  organism  whose  unity  every 
scientist  should  respect  is  contrasted,  in  the  words  of 
Hildebrand,  with  "the  atomistic  view  of  human  and  civic 
bodies"  *^  which  utilitarian  economics  made  the  basis  of 
its  speculations.  In  reality  society  is  both  more  and  less 
than  the  sum  of  individuals  composing  it ;  it  would  de- 
pend upon  viewpoint  and  classification  of  essential 
traits. ^^  To  narrow  down  economics  therefore  to  a 
science  of  exchange  relations  within  a  larger  field,  all  of 
which  was  traversed  in  different  directions  by  the  mem- 
bers of  society,  seemed  to  men  like  Leslie  Stephen,'*'' 
Ingram,^^  L.  v.  Stein,^^  and  Schmoller,^^  a  vain  attempt 
at  dodging  responsibilities.     Economists  were  but  cheat- 

"  Lalor's   (J.  J.)   translation,  ch.  3  of  Introduction. 

"  Nationalokononiip  der  Gcgpnwart  nnd   Zukunft,   pp.   20-30. 

♦'  See  also  Knies,  K.  Politische  olionomie  vom  Gescliichtlichen  Stand- 
punkt,  1883,  pp.  24-5. 

"  Sec  e.  g.  liis  Tlie  Sphere  of  Political  Economy,  one  of  the  addresses 
reprinted  in  his  Social  Rights  and  Duties,  I.SOG  (Swan,  Sonnenschein  & 
Co.),  vol.  1,  p.  105. 

"  Ingram,   J.  K.      History  of  Politicil  Economy,  1888,  ch.  7. 

*' Lehrl)uch  der  Natioualiikonornie.   1S8(!.  3d  edit.,   p.  4. 

"  Grundriss  der  AllRemeiiien  Volk.swirfseliaftslchre,  1001-04,  vol.  1. 
See  also  Ely,  R.  T„  and  collaliorators  in  Outlines  of  Economics,  1009, 
p.  12. 


HISTORISM  217 

ing  themselves  out  of  treasures  rightly  theirs,  if  they 
broke  away  from  sociology.  The  forces  of  nature,  of 
human  nature  in  this  case,  would  mock  the  specialist's 
rules. 

But  since  unity  was  the  most  striking  feature  of  all 
social  life  it  became  furthermore  necessary  to  combine 
ethical  with  matter  of  fact  judgments.^*'  It  was  entirely 
out  of  the  question  to  record  calmly  what  was  happening 
and  why,  as  though  laws  eternal  would  allow  no  deviation 
from  the  customs  of  the  moment,  and  then  to  base  policies 
on  them  regardless  of  moral  values.  Historism  took 
exception  to  the  notion  that  a  mere  distinction  between 
things  as  they  are  and  things  as  they  ought  to  be  elimi- 
nated the  latter  out  of  the  economist's  program.  The 
original  Utilitarian  view  that  the  "economic  man"  was 
at  the  same  time  moral,  and  inevitably  so  because  the 
pursuit  of  pleasure  is  the  only  test  of  a  love  of  virtue, 
was  never  fully  understood  on  the  continent,  or  at  least 
not  among  the  economists.  So  here  was  one  point  of 
dissension  to  bear  in  mind.  However,  in  the  second 
place,  Historism  was  essentially  an  ethical  movement 
descended  from  German  transcendentalism  in  psychology, 
logic,  and  ethics.  Empiricism  was  not  supposed  to 
provide  an  answer  to  questions  of  the  Is  and  Ought. 
It  was  agreed  among  the  Historical  writers  that  ethics 
has  a  task  of  its  own,  and  may  impose  its  standards 
upon  others  just  as  surely  as  economics  might  counsel 
the  legislator.  Indeed  it  was  argued  that  applications  in 
economics  had  no  real  standing  until  moralists  approved 
of  them.  Without  exception  the  plea  of  Historism  was 
for  an  ideal  of  progress,  for  the  acceptance  of  a  moral 
norm,   for  the  subordination   of   economic   principles    to 

""For  evidence  see  works  just  mentioned,  and  also  Sclimoller's  (G.) 
paper  on  tlie  Idea  of  Justice  in  I'olitical  Economy,  in  Annals  of  the 
American  Academy  of  Political  and  Social  Science,  1893-94,  pp.  697-737. 


218    THE  DEVELOPMENT  OF  ECONOMICS 

the  Absolute  in  ethics,  that  contrasted  strangely  with 
the  easy  optimism  of  Naturalistic  and  Utilitarian 
economics. 

The  difference  arose  mainly  from  two  causes.  For  in 
the  first  place  human  nature  was  less  simple  to  the  His- 
torical group  than  to  their  predecessors ;  and  in  the 
second  place  types  of  men  were  distinguished  so  as  to 
account  for  the  antagonism  between  individual  and  so- 
ciety. The  divergent  interests  had  to  be  reconciled  some- 
how. It  could  be  done  by  wise  management  of  human 
nature  and  physical  resources.  ,  But  it  seemed  folly  to 
trust  everything  to  personal  enterprise,  as  if  in  each  man 
there  was  a  rough  balance  of  good  and  evil,  whose  aggre- 
gate effects  would  be  conducive  to  order  and  progress. 
Historism  saw  differences  between  men  as  the  eighteenth 
century  had  not  seen  them.  It  relied  more  upon  moral 
teachings  and  public  control,  and  less  upon  innate  good- 
ness or  Divine  Providence. 

At  the  same  time  it  was  acknowledged  that  human 
selfishness  was  less  imperious  than  the  Benthamites  had 
tried  to  make  out.  The  differences  in  motives  were  shown 
to  be  so  great  as  to  preclude  their  reduction  to  one  or 
two.  Desire  for  wealth  in  particular  was  given  less 
prominence  than  perhaps  even  the  casual  observer  would 
have  liked.  The  hedonistic  premises  were  scouted  as  being 
phantastic  and  unjust  to  man.  IMost  of  the  methodologi- 
cal essays  of  Historism,  in  England  as  much  as  in  Ger- 
many, dwelt  on  this  superficial  analysis  of  the  liuman 
mind.  It  was  held  that  either  the  Utilitarians  did  not 
want  to  know  human  nature,  or  else  that  they  were  car- 
ried away  by  the  spectacle  of  business  men  seeking  forever 
least  pain  for  most  pleasure,  as  if  that  were  all  they 
thought  of.  In  other  words,  man  once  more  was  credited 
with  many  aptitudes  and  designs,  only  a  few  of  which  the 


HISTORISM  219 

older  economics  had  considered  in  its  quest  for  universal 
laws. 

The  "Socialists  of  the  Chair"  in  Germany,  whose  logic 
and  nomenclature  was  not  Historical,  but  whose  ethics 
blended  nicely  with  that  of  Historism,  seconded  this  move 
for  a  moral  regeneration  of  their  science.  In  fact,  their 
outlook  in  noteworthy  respects  resembles  that  of  a 
Roscher  and  Schmoller,  for  one  thing  because  they  stressed 
the  relativity  of  economic  truths  from  the  historical 
and  the  logical  standpoint,  and  for  another  thing  on 
account  of  their  nationalistic  temperament.  Wagner, 
Brentano,  Cohn,  Conrad,  Held,  and  Neumann  are  names 
ever  to  be  associated  with  Historism,  even  if  Utilitarian 
and  Marginal  concepts  found  a  place  on  their  analysis 
of  price.  It  is  characteristic,  e.  g.,  that  Wagner  in  his 
"Outlines  of  Political  Economy,"  1892,  classifies  human 
motives  into  egoistic  and  non-egoistic,  subdividing  the 
former  as  follows :  first,  the  desire  of  wealth  and  the 
dread  of  want  (poverty)  ;  second,  fear  of  punishment  and 
hopes  of  reward ;  third,  love  of  approbation  and  of 
power;  and  fourth,  wish  for  something  to  do — what  in 
the  phrase  of  Veblen  would  amount  to  "instinct  of  work- 
manship." ^^  In  such  analysis  of  human  traits,  in  the 
emphasis  of  legal  relations  as  a  postulate  for  economics, 
in  a  high  regard  for  the  stuff-aspects  of  wealth,  in  the 
inclusion  of  consumption  as  an  integral  part  of  economics, 
— in  these  and  other  points  Historism  had  excellent 
spokesmen  among  the  founders  of  the  "Verein  fiir  Sozial- 
Politik."  Both  tried  to  forget  the  psychological  roots 
of  British  Utilitarianism;  both  aimed  at  a  dynamic  in- 
terpretation of  social  events ;  both  wanted  education  to 
change  the  organization  of  production;  both  assigned  to 

"*'  Grundlegung  der  Politischen  okonomie,  3.  edit,  vol.  1,  p.  87. 


220     THE  DEVELOPMENT  OF  ECONOMICS 

the  State  duties  that  Manchestrianism  had  considered 
worse  than  futile. 

Historism  in  particular  dwelt  on  the  importance  of 
public  control  because  through  it  Germany  was  expected 
to  recover  from  the  blows  of  the  Napoleonic  period.  At 
the  beginning  of  the  nineteenth  century  Germany  was  no 
farther  along  the  road  of  industrial  reorganization  than 
England  at  the  time  of  the  "Wealth  of  Nations."  The 
need  of  an  awakening  was  felt  by  discerning  folk  every- 
where. A  cry  went  up  to  bring  the  fatherland  back  to 
its  days  of  glory  and  might.  The  middle  classes  labored 
as  strenuously  for  a  firm  policy  at  home  and  abroad  as 
the  lower  classes  pinned  their  faith  in  the  downfall  of 
capitalism.  The  utopian  and  socialistic  waves  went  over 
the  land,  welcomed  as  a  deliverance  from  the  adamant 
laws  of  Utilitarianism.  The  masses  cared  little  for  na- 
tionalism as  long  as  capitalistic  pressure  kept  them  down. 
The  leaders  of  scientific  socialism  not  only  scorned  peti- 
tions for  redress,  or  measures  for  national  aggrandize- 
ment, but  condemned  the  whole  social  order  which  was  to 
be  saved  by  this  appeal  ad  hominem.  No  nationalism, 
was  their  slogan! 

Against  this  kind  of  corruption,  then,  Historism 
sought  protection  in  strong  internal  policies.  Not  only 
that  Laissez  Faire  had  proven  a  partial  failure  in  Eng- 
land, not  only  that  Smithian  arguments  rested  on  as- 
sumptions inadmissable  by  modern  psychology,  not  only 
that  the  historical  view  suggested  a  change  of  front 
whenever  conditions  and  aims  changed,  but  also  that 
centrifugal  forces  within  German  borders  had  to  be 
watched  if  race  and  righteousness  were  to  survive.  Hence 
Customs  Union  and  paternalism  went  hand  in  hand. 
Hence  the  fiasco  of  the  stormy  days  of  1848  cheered  men 
both  of  liberal  and  of  conservative  temperament.     Hence 


HISTORISM  221 

the  solicitude  of  Historism  for  a  peaceful,  well-balanced 
plan  of  welding  the  hostile  classes  into  one  great  nation. 
Proletariat  and  plutocracy  were  to  join  in  a  nation- 
wide campaign  for  the  unification  of  all  German  peoples. 
From  Roscher  on  this  concern  for  the  national  aspects 
of  economics  became  noticeable  and  achieved  results  fa- 
miliar to  the  outside  world.  It  was  Roscher  who  thought 
that  economics  "inquires  how  the  various  wants  of  the 
people  of  a  country  .  .  .  may  be  satisfied ;  how  the  satis- 
faction of  these  wants  influences  the  aggregate  national 
life,  and  how  in  turn  they  are  influenced  by  national 
life."  ^^  In  his  opinion,  as  in  that  of  all  his  successors, 
"goods  are  anything  which  can  be  used  whether  directly 
or  indirectly,  for  the  satisfaction  of  any  true,  or  legiti- 
mate [italics  mine]  human  want,  and  whose  utility,  for 
this  purpose,  is  recognized."  ^^  That  is  to  say,  utility 
was  not  anything  whatsoever  capable  of  gratifying  any 
want,  as  the  Utilitarians  asserted,  but  something  admin- 
istering to  wants  socially  warranted.  A  test  was  to  be 
applied  that  a  purely  descriptive  science  had  no  room 
for.  And  so  with  regard  to  most  definitions  pro- 
pounded by  English  economics.  A  national  end  was 
always  kept  in  view.  Economics,  as  O.  Stein  put  it  in 
his  "Past,  Present,  and  Future  of  National  Economy," 
was  primarily  "a  study  of  the  maintenance  and  develop- 
ment of  national  productive  powers."  ^^  Science  and  art 
were  fused  in  one  single  study.  Premises  consequently 
must  harmonize  with  standards  of  public  welfare.  Pri- 
vate property  could  not  be  an  unlimited  right  to  use,  buy 
or  sell  wealth  as  the  owner  saw  fit.  Hypothetically  it 
provided  a  basis  for  economic  analysis,  but  where  advis- 

"  Principles  of  Political  Economy,  vol.  1,  p.  99. 
"Vol.  1,  ch.  1,  §  1. 

"Page  18  of  Vergangenheit,  Gegenwart  und  Zukunft  der  Nationalen 
Wirtschafts-Politik. 


222    THE  DEVELOPMENT  OF  ECONOMICS 

able  it  had  to  be  regulated  under  common  law.  In  this 
way  Knies  and  Schaffle,  Hildebrand  and  Stein  and  Wag- 
ner proposed  to  ward  off  the  revolution  plotted  by  the 
sponsors  of  the  Economic  Interpretation  of  History.  For 
national  grandeur  was  decidedly  preferable  to  the  senti- 
mentalism  of  the  socialists. 

The  query  may  finally  be  put:  If  such  was  the  general 
drift  of  Historism,  how  did  it  propose  to  find  the  laws 
expressive  of  progress  and  prosperity?  And  the  reply 
can  only  be :  No  new  method  of  research  developed  out  of 
all  this  opposition  to  Utilitarianism.  Hildebrand,  like 
Schmoller  fifty  years  later,  essayed  valiantly  to  expound 
a  new  logic  for  old  problems,  but  stopped  in  the  middle 
of  his  discourse.  Opuscules  of  much  merit  were  written 
in  England,  but  nothing  to  match  either  the  scope  or 
depth  of  the  Utilitarian  logic.  Leslie  and  Ingram  dwelt 
long  on  the  defects  of  the  opposite  school,  but  stuck  to 
the  traditional  views  on  in-  and  de-duction,  on  modes  of 
reasoning,  and  the  limits  of  experimentation  in  the  moral 
inquiries.  Roscher  was  admirably  clear  in  his  presenta- 
tion of  the  historical  viewpoint,  so  far  as  it  contrasted 
with  the  static,  or  with  the  Utilitarian  idea  of  human 
nature,  but  had  nothing  to  put  in  place  of  Mill's  "Logic." 
Knies  was  no  logician,  and  made  no  pretense  in  his  later 
years  of  having  founded  an  "historical  method."  Hilde- 
brand kept  silent  on  this  moot  point.  Schmoller's  "Funda- 
mental Questions  on  Law  and  Social  Economy,"  1875, 
served  a  particular  occasion  and  nowhere  penetrates  the 
surface  of  things.  Trcitschke  is  pilloried,  but  the  rest  is 
negligible.  Schacffle  might  have  been  expected  to  speak 
a  weighty  word  on  the  subject,  but  apart  from  general 
remarks  nothing  in  his  ponderous  tomes  bears  on  method. 
No  psychology  of  reasoning  was  attempted.  No  logic 
was  deemed  essential  to  the  defense  of  Historism.     If  it 


HISTORISM  223 

proved  to  be  anything  other  than  a  critique  of  Utilita- 
rianism, it  was  a  philosophy  of  history,  but  one  neither 
as  comprehensive  nor  as  profound  as  Comte's  or  Hegers. 
The  real  question  for  Historism  was  in  fact  not  very 
lucidly  stated,  though  it  took  up  a  great  deal  of  space 
in  its  literature.  And  this  was  the  question  whether  hu-  » 
man  nature  was  to  be  assumed  as  changing  with  its 
physical  and  economic  environment,  or  whether  it  was 
substantially  constant?  Or  to  bring  out  another  side: 
Could  the  Utilitarian  and  Naturalistic  economics  give  us 
the  whole  of  human  nature,  or  was  there  something  that 
only  a  long-time  view  revealed,  according  to  our  ability 
to  see  and  our  patience  in  waiting  for  the  data?  That 
is,  Historism  was  indirectly,  though  not  in  so  many 
words,  asking  whether  economics  revolves  about  instincts 
or  about  experience  post-natally  acquired.  In  the 
former  case  psychology  might  supply  all  the  requisites 
for  a  science  such  as  J.  S.  Mill  believed  in  when  his 
"Logic"  was  first  planned;  in  the  latter  case  Comte  had 
more  to  offer  than  Hume  or  Bentham,  the  natural  out- 
come being  a  restatement  of  the  Smithian  doctrine. 
,  Now,  Historism  was  emphatic  in  reminding  us  of  the 
complexity  of  human  nature  and  social  processes,  the 
number  of  variables  being  conceived  as  too  vast  for  any 
marshaling  into  brief  formulae.  The  universalism  of 
the  Utilitarians  therefore  was  rejected,  and  the  field  of 
economics  as  a  science  enlarged  so  as  to  embrace  all  social 
facts. ^^  But  it  needs  only  a  perusal  of  the  leading  His- 
torical treatises  to  see  that  their  methods  remained  the 
old.  The  contribution  of  Historism  consisted  in  its  gen- 
eral viewpoint  and  shifting  of  stress  where  many  facts 
had   to    be    compared    and   weighed;    but    its    economics, 

"  See  for  instance  Ingram,  J.  K.     The  Present  Position  and  Prospects 
of  Political  Economy  ;  and  Dillon,  W.     The  Dismal  Science,  1882. 


224j     the  development  OF  ECONOMICS 

strictly  speaking,  is  either  Utilitarian  in  details,  or  simply 
economic  history.  No  such  precise  economic  laws  as  the 
Ricardians  had  formulated  were  found.  Deduction  was 
retained  in  much  of  the  descriptive  work,  and  where  the 
past  was  used  to  illuminate  an  abstract  question  of  eco- 
nomic science,  deduction  figured  as  conspicuously  as  in- 
duction. For  very  good  and  sufficient  reasons  nothing 
else  was  possible. 

Statistics,  to  be  sure,  were  also  requisitioned  to  add 
their  mite  to  the  larger  fund,  but  few  claimed  to  have 
discovered  fundamental  principles  by  that  route.  Knies 
himself  confessed  that  history  gave  only  analogies  which 
could  not,  in  the  long  run,  take  the  place  of  deduction. 
Indeed,  the  more  one  observed  the  complexity  of  human 
nature,  the  less  permissible  was  a  reliance  upon  statistics 
for  the  elucidation  of  economic  laws.  For  correlations 
were  never  exactly  the  same ;  nor  was  there  the  excuse  of 
singling  out  specific  traits  on  the  ground,  dear  to  the 
Utilitarians,  that  the  plain-pleasure  experiences  are  the 
commonest  of  all.  Leslie  was  correct  in  saying:  An 
economic  law  is  "a  function  of  so  many  independent  vari- 
ables that  it  must  be  complex  beyond  all  conception  if  it 
takes  them  all  into  account ;  while  it  must  yet  be  neces- 
sarily inaccurate  if  it  does  not  take  them  into  ac- 
count." ^^  In  such  a  predicament,  what  was  the  student 
to  do?  Believe  in  economics,  or  abandon  it  for  sociology, 
hoping  thus  to  find  a  way  to  truth?  Historism,  to  be 
consistent,  had  of  course  to  decide  for  tlie  latter. 

For  this  reason  Historical  economics  partakes  of  the 
nature  of  a  sociological  survey.  We  arc  transplanted 
back,  so  to  sa}^,  into  the  Kameralism  of  an  earlier  period 
where  all  facts  are  grist  to  the  economist's  mill,  and 
amplitude  makes  up  for  dearth  of  laws,  for  lack  of  neat- 

»•  Social  Rights  and  Duties,  voi.  1,  p.  104. 


HISTORISM  225 

ness  in  the  weaving  of  constant  relations.  In  Roscher 
and  Schmoller  this  breadth  of  treatment  is  impressive  and 
refreshing,  particularly  after  a  perusal  of  Senior  or 
Ricardo  or  Cairnes.  On  the  whole,  however,  Historism 
did  not  excel  either  Say  or  Rau  or  Mill,  to  say  nothing 
of  weaknesses  precisely  where  those  writers  were  strong- 
est. Historism,  in  short,  brought  with  it  an  imposing  -^ 
erudition,  unusual  breadth  of  view,  new  light  on  socio- 
economic subjects,  scholarly  monographs  by  the  score 
whose  pages  will  always  testify  to  the  industry  and  con- 
scientious accuracy  of  their  authors,  keen  criticism  at 
times  on  sociological  thought,  an  inspiring  ideal  of  prog- 
ress and  moral  responsibilities,  a  better  understanding 
of  government  and  law  in  their  bearing  upon  economics 
and  vice  versa,  attempts  at  correlating  production  and 
physical  environment,  or  income  and  levels  of  living,  and 
finally  a  study  of  certain  consequences  due  to  an  indi- 
vidualistic norm  of  productivity  and  capital  whose  sig- 
nificance had  not  been  lost  to  earlier  writers  like  Lauder- 
dale and  Rae.  In  all  these  points,  including  an  ambitious 
scheme  for  utilizing  knowledge  in  a  paternal  type  of 
public  control,  the  advocates  of  the  Historical  principle 
did  better  than  their  predecessors. 

It  was  a  question  only  whether,  in  achieving  such 
things,  economics  had  not  lost  its  standing  as  an  exact 
science;  whether  the  original  intent  was  not  lost  over  a 
desire  to  obtain  speedy  results.  If  economics  was  to 
resemble  natural  science  and  mathematics,  where  reason- 
ing had  netted  knowledge  of  the  most  reliable  sort,  it 
would  have  to  take  counsel  with  itself.  Many  at  least 
were  disposed  to  see  it  that  way.  Once  more  the  revision- 
ists had  a  clear  track,  if  Historism  fell  short  of  its  mark. 
For  the  second  time  it  seemed  necessary  that  economics 
return  to  older  ideals,  to  premises  which  a  theory  of 
progress  could  not  sanction. 


CHAPTER  SEVEN 
MARGINISM 

I.  Peemises 

Marginism  Defined. — The  term  Marginism  has  been 
applied  to  the  doctrine  which  branched  off  from  Utih- 
tarianism  and  Historism  beginning  about  1870.  As  the 
word  is  now  understood,  and  as  it  for  that  reason  will 
here  be  used,  it  means  the  explanation  of  exchange  values 
by  states  of  feeling  and  of  consciousness  in  general,  but 
especially  also  the  use  of  least  ("marginal")  fractions 
as  a  standard  for  determining  the  value  of  aggregates. 
Again,  marginism  differed  from  the  earlier  economic  sys- 
tems in  that  it  compared  units  of  mant  and  feeling  in- 
stead of  things.  Even  in  measuring  productivity  the 
standard  was  one  of  differential  values  psychologically 
determined,  although  deviations  were  now  and  then  tol- 
erated for  the  sake  of  a  particular  argument.  However, 
it  is  not  at  all  impossible  that  this  difference  between  ob- 
jective measurements  of  price  through  labor-time  or  ex- 
penses, and  subjective  measurements  of  price  with  the  aid 
of  an  intellectualistic  theory  of  feelings  and  demands,  will 
be  considered  less  momentous  in  the  future  than  to-day. 
For  on  the  one  hand,  Marginism  has  much  in  common 
with  both  Naturalism  and  Utilitarianism ;  and  on  the 
other,  hedonism  is  only  one  feature  in  the  Marginal  phi- 
losophy. 

The     immediate     occasion    for     Marginism    was     the 

226 


MARGINISM  227 

breakdown,  in  various  parts,  of  Utilitarianism.  It  had 
become  apparent  by  the  middle  of  the  nineteenth  century 
that  the  Ricardian  scheme  could  be  maintained  only  at 
the  cost  of  empirical  truths.  The  world  without  did  not 
bear  out  what  abstruse  thinkers  demonstrated  so  ably. 
Too  many  qualifications,  amplifications,  rectifications, 
and  even  contradictories  had  slipped  into  the  treatises 
that  started  with  the  psychology  of  Bentham  and  Mill! 

Historism  however,  it  was  soon  realized,  could  not  fill 
the  void  either.  For  while  it  did  good  yeoman  service  in 
pressing  the  enemy  back,  in  opposing  static  with  dynamic 
concepts,  it  could  not  claim  the  field  permanently.  The 
kernel  of  truth  in  its  argument  was  recognized  and 
acclaimed  by  many  who  took  long-time  views  of  events, 
desirous  of  a  moral  solution  of  economic  questions.  But 
the  hope — if  any  had  entertained  it  at  all — of  discovering 
laws  historically  or  statistically  was  soon  given  up. 
Nothing,  it  became  evident  before  long,  could  be  done  if 
vast  masses  of  material  had  to  be  turned  over  for  pur- 
poses of  induction.  If  Utilitarianism  had  made  the  work 
too  easy,  the  Historians  had  made  it  unduly  complicated. 
Only  a  prolonged  sociological  study  could  have  satisfied 
men  like  Knies  and  Schmoller.  Hence,  while  as  a  cor- 
rection of  older  deductions,  of  economic  generalizations 
whose  fallacy  external  conditions  and  policies  increas- 
ingly revealed,  the  Historical  movement  had  scored  a 
certain  success,  as  a  program  for  reconstruction  it  had 
failed.  The  question  remained:  What  was  at  the  root  of 
the  Utilitarian  decadence?  What  must  be  done  to  protect 
economics  against  an  art  of  "political  economy?"  How 
much  could  be  retained  of  the  old,  and  where  lay  the 
means  for  its  development  into  a  science  comparable  with 
physics  or  mathematics? 

Marginism  was  the  answer  to  this  question.     The  Mar- 


228     THE  DEVELOPMENT  OF  ECONOMICS 

ginal  doctrine  turns  on  a  few  fundamentals,  largely  taken 
over  from  Utilitarianism,  but  in  part  peculiar  to  itself. 
For  to  begin  with,  the  concept  of  an  "economic  man"  and 
of  hedonism  in  general  was  accepted  as  an  indispensable, 
unassailable  fact  for  the  purposes  in  hand.  In  the 
second  place,  the  entrepreneur  standpoint,  tentativcl}- 
adopted  by  Smith,  but  consciously  cultivated  first  by  the 
Utilitarians  as  the  only  one  compatible  with  a  pretense 
to  an  "exact"  economics,  continued  to  predominate,  some- 
times to  be  sure  under  protest  because  of  its  apparent 
one-sidedness  and  menace  to  morality,  but  on  the  whole 
with  the  approval  of  those  who  held  system  higher  than 
sentiment. 

But  on  the  other  hand  Marginism  replaced  the  objec- 
tive view  of  the  Naturalists,  Utilitarians,  and  Historical 
group  by  a  subjective  one,  the  source  of  value  being  found 
in  men  and  not  in  materials.  Back  of  things,  they  said, 
lay  thoughts,  and  these  latter  must  furnish  the  key  to 
the  problem  that  all  other  systems  had  practically  left 
unsolved.  So  wants  and  ideas  took  the  place  of  wealth 
and  objects  in  the  concrete.  Totals  and  their  changes 
were  referred  to  least  doses  in  successive  additions  or 
subtractions  of  wants  and  values.  Ratios  dealt  with 
feelings,  but  not  with  units  of  goods.  Or  rather,  these 
latter  were  reduced  to  units  of  the  former,  the  differences 
between  feelings  or  preferences,  between  efforts  or  sacri- 
fices, serving  to  explain  ratios  of  supply,  rates  of  out- 
put, and  shares  of  income  as  originating  within  the  ex- 
change regime.  This  reckoning  of  everything,  of  prices 
and  incomes,  of  wealth  and  of  capital,  by  differentials 
and  margins  psychologically  measured,  is  the  quintessence 
of  Marginism.  It  was,  in  a  brief  phrase,  a  theory  of 
least  values   and  productivities,  based  on  premises   and 


MARGINISM  229 

definitions  for  the  most  part  originating  in  Utilitarian- 
ism. 

Subjectivity  of  Value. — The  notion  of  subjectivity 
however  is  much  older  than  Marginism.  It  was  mentioned, 
now  vaguely,  now  definitely  and  with  emphasis  and  pur- 
pose, by  a  host  of  writers  before  Jevons  announced  his 
discovery  to  the  world.  Condillac,  e.  g.,  in  his  "The 
Interrelation  between  Commerce  and  Government,"  1776, 
showed  that  without  want  there  can  be  no  value,  that 
imagined  scarcity  is  as  important  in  price-determination 
as  real  scarcity,  that  utility  is  not  something  inherent 
in  things,  but  imputed  to  them  by  man,  mherefore  manu- 
facture was  as  truly  an  act  of  production  as  agriculture; 
and  he  furthermore  pointed  to  the  differential  preferences 
among  men  for  one  and  the  same  thing  or  for  different 
things  as  the  proof  of  advantage  in  trading.  No  essay 
of  like  scope  went  deeper  into  the  subject  of  value  and 
exchange.  Few  of  his  contemporaries  spoke  so  prophet- 
ically on  an  old  topic  that  even  then  seemed  exhausted! 

But  particularly  after  his  time  was  the  personal  aspect 
of  value  brought  out  both  in  Germany  and  in  England. 
Thus  Huf eland  in  1807  wrote:  "All  goods  are  goods  only 
because  of  our  conception  of  this  utility  in  them" ;  ^ 
Thompson  in  1824:  "The  desire  removed,  no  labor  will, 
except  by  compulsion,  be  employed  upon  the  production 
of  goods"  ;^  Jennings  in  1854:  "Value  is  an  attribute 
ascribed  by  man  to  objects  from  a  remembrance  of  their 
services  in  the  past,  and  conviction  that  such  services  are 
still  available";  ^  Courcelle-Seneuil  in  1858:  "Utihty  of 
an  object  lasts  as  long  as  our  opinion  of  it;  that  is,  it  is 

'  Ouoted  by  Roscher,  W.,  in  his  Geschicbte  der.  Xationalokonomik  in 
Deutschland,  1874,  p.  658. 

=  Principles  of  the  Distribution  of  Wealth,  1824,  p.  12. 

'  The  Natural  Elements  of  Political  Economy,  pp.  72  and  202. 


230    THE  DEVELOPMENT  OF  ECONOMICS 

above  all  subjective";*  and  MacLeod  in  1872:  "Value, 
like  color  and  sound,  exists  only  in  the  human  mind. 
There  is  neither  color  nor  sound  nor  value  in  nature,"  ^ 
the  question  thus  arising:  "If  labor  is  the  sole  cause  of 
value,  what  is  the  cause  of  the  value  of  labor?" 

MacLeod,  to  be  sure,  published  his  "Principles  of  Politi- 
cal Economy"  a  year  after  Jevons'  "Theory'*  had  been 
published,  but  certainly  the  question,  why  labor  had 
value,  was  nowhere  put  so  bluntly ;  not  by  Lauderdale 
nor  Lloyd,*'  nor  Baudrillart  who  in  "The  Relation  of 
Ethics  to  Political  Economy,"  ^  1860,  simply  made  a 
distinction  between  utility  in  things  and  values  created 
by  man,  following  Storch  in  this  regard.  Courcelle- 
Seneuil  came  the  nearest  to  a  marginal  interpretation  of 
price  in  that  he  defined  it  as  a  balance  of  wants,  and 
virtually  did  away  with  objective  costs.  In  other  words, 
he  adapted  J.  S.  Mill's  statement  to  a  subjective  view- 
point, so  that  preferences  took  the  place  of  differentials 
in  cost.  Lloyd  in  his  lecture  on  the  "Notion  of  Value," 
1833,  differentiated  between  absolute  and  exchange  value, 
associating  the  former  with  valuations  independent  of 
exchange.  The  importance  of  scarcity  for  economic 
value,  the  rise  of  value  with  decreasing  supply,  and  the 
principle  of  illimitable  wants  due  to  the  diversification 
of  products — all  these  now  familiar  ideas  gave  a  touch 
of  novelty  to  Lloyd's  treatment.  Similarly  Banfield  ^  in 
184)4  dealt  with  the  effects  of  variety  in  our  scaling  of 
wants.  However,  one  must  go  to  Jennings  and  Gossen, 
and  the  better-known  treatises  of  the  seventies  to  ap- 
preciate  the   drift    of    Marginism    in   its    earlier   stages. 

*  Traits,  vol.  1,  pp.  45  and  243.  Soc  also  Book  I,  ch.  8  passim,  where 
the  effect  of  differential  wants  on  trade  is  succinctly  stated. 

'Principles  of  I'olitical  Kconoiiiv,  1S72,  vol.  1,  ch.  5,  Sect.  II,   §J  9-16. 
«  Lloyd,  W.  F.     On  the  Notion  of  Value,  1833. 

'  See  especially  pp.  244-57  of  Des  liapports  de  la  Morale  et  de 
I'Economie  Politique. 

•  Banfleld,  J.  E.     Lecture  on  the  Organization  of  Labor,  1844, 


MARGINISM  231 

Jevons  thus  writes :  Utility  is  an  "abstract  quality  where- 
by an  object  serves  our  purposes  and  becomes  entitled 
to  rank  as  a  commodity" ;  ^  Menger  in  his  "Principles  of 
Economics,"  1871 :  "The  essence  of  value  as  well  as  its 
measure  is  entirely  subjective";  ^•^  Wieser  in  1884: 
"Value  is  an  instance  of  human  interest,  but  associated 
with  a  condition  of  things.'*  ^^ 

Between  1855  and  1875  Marginism  was  definitely  for- 
mulated as  a  theory  of  price  and  income,  all  subsequent 
developments  resting  logically  on  the  foundation  laid 
during  those  two  decades.  As  Table  Three  shows,  there 
was  from  the  start  considerable  agreement  among  the 
founders,  although  differences  become  noticeable  at  closer 
range. 

The  Founders  of  Marginism. — What  the  five  writers 
grouped  together  in  this  tabulation  had  in  common  was 
a  subjective  view  of  value,  a  stress  of  the  law  of  diminish- 
ing returns  and  of  the  relation  between  scarcity  and  value 
— what  Wieser  was  pleased  to  call  the  "paradox  of  value," 
— the  relation  of  trade  to  differences  in  want-intensity 
as  between  different  persons  or  with  regard  to  different 
goods  for  any  one  person,  the  measuring  of  price  by 
least  wants  respectively  utilities,  and  the  thought  of  con- 
necting, at  one  point  or  another,  prices  with  income. 
Emphasis  was  by  all  five  put  on  price.  The  older  notion 
of  things  and  costs  was  either  discarded  or  made  to  fit 
in  with  the  psychological  aspects  of  valuation.  In  gen- 
eral, the  economic  problem  was  stated  more  concisely 
perhaps  than  ever  before,  and  deductive  reasoning  relied 
upon  for  expanding  the  argument. 

•Theory  of  Political  Economy,  edit,  of  1879,  pp.  38  and  43.  Jevons 
elsewhere  informs  us  that  his  principal  ideas  were  developed  between 
1855  and  1860. 

">  Grundsatze  der  Volk.<;wirtschaftslehre.   p.  119. 

"  Ursprung  und  Hauptgesetze  des  Wirtschaftlichen  Werthes,  pp.  79-93. 


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236    THE  DEVELOPMENT  OF  ECONOMICS 

Appreciable  differences  however  existed  and  under  the 
circumstances  were  to  be  expected.  For  Marginism  had 
small  beginnings  like  most  things  impressive  for  their  size. 
No  one  economist  developed  a  Marginal  system  in  the  way 
Smith  or  the  Physiocrats  may  be  said  to  have  cast  their 
system  at  a  single  molding.  On  the  contrary,  growth 
was  not  only  slow,  but  its  stages  may  be  easily  discerned 
in  the  several  works  on  the  subject.  The  original  thought 
was  to  explain  value  by  going  back  of  things  and  ratios 
of  exchange  to  ideas  and  rates  of  preference  or  satisfac- 
tion. Not  special  kinds  of  goods  were  covered  by  this 
analysis,  but  only  goods  in  the  abstract,  the  difficulties 
inherent  in  a  measurement  of,  e.  g.,  joint  utilities  not 
being  fully  understood.  The  identity  of  price  and  income 
was  remembered  from  the  outset,  no  doubt  because  Utili- 
tarianism had  long  labored  with  this  fact ;  but  to  follow 
it  up  into  all  the  situations  an  imperfectly  competitive 
exchange  mechanism  gave  rise  to  was  still  another  matter. 
Distribution  again  was  not  incorporated  successfully  into 
the  pricing  process  until  the  end  of  the  eighties,  that  is 
more  than  a  generation  after  the  first  thorough  treatment 
of  marginal  wants. 

If  we  compare  the  viewpoints  of  the  founders  Gossen, 
Jennings,  Jevons,  Menger,  and  Walras  whose  works  ap- 
peared between  1854  and  1874,  we  shall  note  in  the  first 
place  marked  variations  in  stress  and  method.  Gossen, 
Menger,  and  Walras  for  instance  said  nothing  of  psy- 
chology, although  it  formed  implicitly  a  basis  for  their 
reasoning.  Jennings  was  the  most  explicit  and  careful  in 
developing  his  psychological  data,  while  Jevons  made  it 
clear  from  the  beginning  that  Bentham  and  Bain  had 
been  his  mentors.  In  the  second  place,  the  treatment  was 
essentially  mathematical  with  Walras  and,  in  the  price 
analysis  itself,  also  with  Gossen ;  but  Jevons  is  readily 


MARGINISM  237 

understood  without  his  graphs,  and  Jennings  and  Menger 
use  entirely  a  verbal  exposition,  the  possibility  of  coordi- 
nates and  correlations  not  being  even  suggested.  Third, 
Jennings  alone  restricted  himself  to  the  valuation  side  of 
price,  while  the  others  made  less  of  physiology  and  more 
of  the  exchange  aspect  of  marginal  wants.  Walras  par- 
ticularly treated  of  equations  of  supply  and  demand,  a 
topic  which  Jevons  subordinated  to  his  larger  question 
of  price  and  income,  while  Gossen  and  Menger  made  one 
forget  their  central  problem  over  corollaries  affecting 
economic  policies  or  social  reforms.  Fourth,  as  regards 
questions  of  policy,  all  five  founders  proved  individualists 
in  theory,  but  friends  of  public  control  in  practice.  Thus 
Gossen  and  Walras  discussed  plans  for  the  nationaliza- 
tion of  lands  or  of  rents,  in  order  to  provide  cheap 
credits  or  high  returns  to  the  tiller  of  the  soil.  Menger 
reported  favorably  on  interference  by  the  State.  Jen- 
nings moralized  chiefly  with  the  intent  of  improving  on 
the  brute  struggle  to  which  he  was  so  unwilling  a  witness ; 
and  Jevons  from  start  to  finish  took  the  keenest  interest 
in  any  project  on  behalf  of  the  masses.  In  fact,  it  would 
not  be  too  much  to  say  that  Marglnism  was  as  paternalis- 
tic outside  of  its  conceptual  system  as  it  was  individualis- 
tic within  it.  Few  economists  have  striven  harder  to 
give  to  the  producer  his  share,  or  to  raise  by  dint  of 
concerted  social  effort  under  public  supervision,  the  aver- 
age man's  level  of  living  and  thinking  than  the  pillars  of 
Marginism,  whose  abstractions  dealt  so  brusquely  with 
sentimental  idealists  ! 

Passing  over  now  to  details  one  must  note  a  good  many 
diflFerences  not  perhaps  important  for  the  later  develop- 
ment of  Marginism,  but  instructive  on  account  of  the 
light  they  throw  upon  the  inception  of  the  movement. 
The  following  seem  to  deserve  special  mention. 


238    THE  DEVELOPMENT  OF  ECONOMICS 

Walras  was  the  only  one  to  interrelate  the  marginal 
utilities  of  all  goods  in  the  market,  showing  that  these 
relative  magnitudes  helped  to  fix  the  exchange-ratio  for 
any  one  good.  He  also  eliminated  interest  from  a  static 
view  of  economics,  and  rejected  the  Ricardian  idea 
of  a  differential  rent  dependent  upon  different  de- 
grees of  fertility  and  the  existence  of  no-rent  soil. 
Second,  the  time-factor  in  the  measurement  of  wants  was 
ignored  by  all  but  Gossen  and  Jevons,  who  because  of 
their  mathematical  training  probably  had  a  better  idea 
of  "functions"  than  the  rest,  while  Gossen  alone  related 
diminishing  satisfaction  to  periodic,  habitual  uses  of 
a  good  by  one  and  the  same  person.  In  all  other 
cases  the  law,  given  different  names,  was  illus- 
trated from  consumption  at  one  particular  moment. 
Third,  the  "paradox  of  value,'*  though  implied  by  all 
and  at  any  rate  Lauderdale  and  Say,  was  not  always 
stated  clearly,  nor  was  it  till  Wieser  wrote  his  "Natural 
Value,'*  1889,  that  the  phrase  served  regularly  to  ex- 
plain what  labor  theories  of  price  couldn't  explain. 
Fourth,  the  differential  preferences  for  any  one  article 
by  different  persons  was  not  expressly  discussed  by 
Jevons,  while  the  differential  satisfactions  derived  from 
any  one  material  put  to  different  uses,  appearing  in 
various  concrete  forms,  seemed  to  him  of  obvious  signifi- 
cance. Fifth,  labor-pain  was  connected  with  pleasure- 
values  by  Gosse.i,  Jennings,  and  Jevons,  but  not  by  the 
others.  The  first  three,  however,  dealt  with  the  ques- 
tion rather  cavalierly,  so  that  it  would  be  wrong  to  as- 
cribe to  them  the  ideas  since  associated  with  Marshall, 
Wieser,  Dietzel,  and  especially  also  American  IMarginists. 
Sixth,  Menger  as  early  as  1871  gave  us  a  productivity- 
theory  of  wages  and  an  agio-theory  of  interest,  while 
Jevons   accounted   for   interest  on   the  grounds   of   yield 


MARGINISM  239 

in  concrete  form.  That  Monger  espoused  the  cause  of 
time-preference  even  while  reducing  wage  to  a  marginal 
contribution  of  labor  may  seem  strange,  but  is  undoubt- 
edly the  case.  When  treating  of  wages  the  Utilitarian 
or  Naturalistic  definition  of  wealth  apparently  decided; 
when  pondering  on  interest  the  subjective  view  prevailed 
— a  circumstance  nicely  illustrated  in  the  tenacity  with 
which  Marginism  pursued  the  general  problem  of  inter- 
est and  capital,  making  of  capital  a  fund,  instead  of 
treating  it  as  a  special  case  of  tangible  wealth  whose 
root  could  be  nothing  else  than  labor. 

Seventh,  Jevons  was  alone  in  emphasizing  the  difference 
between  total  and  final  utility,  and  in  trying  to  justify 
the  conception  of  price  as  the  average  result  of  many 
preferences  competing  at  a  sale.  As  the  author  of 
"Principles  of  Science,"  1874,  which  even  before  that  date 
engrossed  his  mind,  he  was  not  unnaturally  persuaded  to 
use  a  mathematical  idea  in  explaining  a  psychological 
fact.  Individual  and  aggregate  were  thus  to  be  made 
comparable  regardless  of  the  fictitious  nature  of  all  arith- 
metical averages  which  none  knew  better  than  Jevons. 
Eighth,  the  bearing  of  total  supply  on  individual  ratings 
of  value  was  overlooked  by  all  but  Walras,  who  however 
did  not  permit  this  discovery  to  mar  the  main  argument 
of  Marginism.  Ninth,  the  problem  of  imputing  exact 
values  to  individual  items  used  jointly  was  boldly  taken 
up  by  Menger  and  thus  became  paramount  in  economic 
analysis.  Gossen  however  refused  to  deal  with  it  be- 
cause, as  he  felt,  the  complexity  of  the  situation  would 
make  any  satisfactory  measurements  impossible.^"  Tenth, 
the  value  of  a  classification  of  goods  according  to  the 
stage  they  had  reached  in  productive  processes,  or  ac- 
cording to  their  joint  or  single  use,  was  clearly  recog- 

"  Page  27. 


240     THE  DEVELOPMENT  OF  ECONOMICS 

nized  by  Gossen  and  Menger,  the  latter  particular!}' 
basing  his  pricing  on  it.  The  other  three  founders  got 
along  without  it.  They  never  attacked  this  special  phase 
of  the  pricing  problem,  so  did  not  need  the  distinctions 
made  by  the  two  Germans. 

The  differences  in  details  however  should  not  blind  us 
to  the  general  agreement  among  the  five  originators  of 
Marginism,  nor  to  the  rapid  development  of  their  main 
theorem.  What  at  first  had  looked  like  a  harmless 
change  of  front,  undertaken  for  the  sake  of  reconciling 
value  and  wealth,  eventually  turned  out  to  be  the  signal 
for  an  open  revolt  against  the  "classical"  doctrines. 
Jennings  started  by  showing  the  discrepancy  between 
Bentham's  hedonism  and  the  measuring  of  values  through 
cost,  that  is  through  inert  matter.  To  him  the  first 
point  was  that  goods  became  valuable  in  proportion  to 
scarcity,  and  "because  their  future  services  are  antici- 
pated." ^^  Tlie  law  of  the  variations  of  sensations,  as 
he  called  the  law  of  diminishing  utility,  was  all  important 
because  it  made  out  of  value  a  function  of  feelings  purely 
within  us. 

Gossen  by  similar  reasoning,  though  in  different  terms, 
arrived  at  the  conclusion  that  "the  price  for  every  article 
is  fixed  at  that  point  where  the  whole  supply  is  sold."  ^^ 
But  he  also  urged  society  so  to  distribute  its  productive 
powers  and  consumption  goods  that  the  marginal  grati- 
fication of  any  good  would  at  least  counterbalance  the 
greatest  labor-pain  incurred  in  the  production  of  any  unit 
of  such  a  good.^^  Furtliermore,  though  not  in  the  direct 
line  of  economic  thought,  the  following  deductions  made 
by  Gossen  on  the  strengtli  of  his  principal  theorem 
deserved  mention:  First,  that  the  price  level  is  determined 

"  Natural  Eleinonts  of  Political  Economy,   pp.  210-12. 

'*  Entwickhintr  dcr  Gesctze  des  Mensclilichon  Vorkchrs,  p.  05. 

"  Ibidem,  p.  4.^. 


MARGINISM  241 

by  a  sum,  of  which  one  factor  is  the  product  of  the  velocity 
of  circulation  multiplied  by  the  amount  of  money  circu- 
lating, and  the  other  bank-credits,  this  sum  to  be  divided 
by  the  volume  of  goods  exchanged;  second,  that  rural 
credits  should  be  subject  to  central  control;  third,  that 
differential  land-rents  might  be  used  by  the  government 
to  buy  land  with  a  view  to  renting  it  out  at  reasonable 
rates  to  the  most  efficient  workers ;  fourth,  that  child 
labor  should  be  prohibited  and  women  given  the  same 
rights  and  educational  facilities  as  men;  and  fifth,  that 
science  be  used  more  liberally  toward  the  application  of 
religion  to  social  questions. 

Gossen,  then,  was  a  man  of  many  ideas,  and  a  worthy 
contemporary  of  Jennings.  That  both  failed  to  make  an 
impression  upon  their  own  age  is  due  not  to  their  inability 
to  explain  their  novel  viewpoint,  but — we  must  assume — 
to  the  prestige  and  official  standing  of  opposite  lines  of 
thought.  Utilitarianism  was  at  its  height  in  the  second 
third  of  the  nineteenth  century.  The  reservations  that 
gradually  came  to  mar  its  logical  structure  or  its  main 
arguments  had  not  yet  become  obtrusive.  Psychology 
itself  had  made  appreciable  progress  even  before  1870, 
but  it  was  not  studied  by  economists  so  as  to  either  injure 
Utilitarianism  or  benefit  a  subjective  approach  to  price 
analysis. 

Menger  and  Jevons  gained  a  hearing  at  once  partly 
because  of  the  controversy  raised  by  Historism,  and 
partly  because  of  the  skill  with  which  Jevons  made  use 
of  sensationalistic  psychology  in  developing  his  marginal 
concept.  Certainly  it  was  significant  and  in  a  way  for- 
tunate that  three  men  like  Jevons,  Menger,  and  Walras 
arrived  almost  simultaneously  at  the  same  fundamental 
opinion.  For  now  there  was  a  link  provided  between 
Austria,  France,  and  England  that  could  not  but  hasten 


242     THE  DEVELOPMENT  OF  ECONOMICS 

the  dissemination  of  the  new  knowledge.  Herbartian 
psychology  and  Fechnerian  experiments  were  nowhere 
enlisted  to  strengthen  the  main  argument.  What  counted 
was  solely  the  common  bond  of  a  single  subject  for  all 
three  investigators,  a  desire  to  clear  economics  of  cer- 
tain inconsistencies  that  the  early  Ricardians  had  noth- 
ing to  do  with,  and  the  hope,  lambent  in  all  three  writers, 
that  economics  might  fulfill  its  first  promises,  might  be 
proven  to  constitute  a  true  science,  might  yield  precise 
results  regardless  of  what  nationalists  and  historians 
claimed  to  the  contrary.  Utilitarianism  from  a  new 
angle,  with  slightly  different  stress  of  materials  and 
methods,  this  was  the  aim  of  Marginism  from  the  outset ! 
As  a  result  of  these  first  inquiries  of  the  pioneers  some 
decidedly  fundamental  propositions  were  laid  down  even 
before  1880,  a  fact  easily  overlooked  when  one  labors  in 
the  midst  of  treatises  written  since  that  time.  Walras, 
e.  g.,  had  said  in  his  "Elements  of  Pure  Economics," 
1874:  Effective  demand  is  "demand  of  a  certain  amount 
of  goods  at  a  certain  price,"  ^^  and :  "The  demand  or 
supply  of  each  of  the  commodities  (exchanged)  by  each 
of  the  traders  is  a  function  not  only  of  the  price  of  that 
commodity,  but  also  of  the  price  of  all  others.  .  .  ."  ^^ 
Both  Menger  and  Jevons  used  the  idea  of  interchangeable 
units  in  a  homogeneous  supply  of  commodities  or  serv- 
ices,^^  a  thought  that  lent  a  convincing  tone  to  the  general 
theory  of  imputation  and  could  not  well  be  dispensed 
with,  whether  stated  in  so  many  words  or  not.  However, 
neither  Gossen  nor  Walras  mentioned  the  question  at 
all,    doubtless    because    of    their    special   interest    in    the 

'•Elements  d'Economie  Politique  Pure,  2.  edit.,  p.  G8. 

"  See  an  article  of  his  in  Aniuils  of  the  American  Academy  of  Political 
and  Social  Science,  vol.  HI  (1.SU2),  entitled  Geometrical  Theory  of  tlie 
Determination  of  Prices,  p.  47. 

>'  Jevons,  W.  S.  Theory  of  Political  Economy,  2.  edit.,  p.  94.  See 
also  Menger,  C.     Gruudsiitze,  ch.  3,   §   2-3. 


MARGINISM  243 

market  side  of  pricing.  In  general,  it  must  be  admitted, 
Menger  and  Jevons  went  farthest  in  their  attempts  at  an 
all-embracing  price  analysis,  Mcngcr  for  instance  acting 
with  this  end  in  view  when  he  carefully  noted  the  difference 
between  goods  admitting  of  one  use  only,  and  such  as 
might  be  used  successively  and  to  many  different  pur- 
poses. Suggestions  for  a  measurement  of  putative 
amounts  of  a  product  due  to  any  one  agent  were  thus 
given  from  the  start. 

However,  Jevons  was  no  less  a  logician  than  the  Aus- 
trian. Indeed,  if  anything  he  reasoned  more  formally 
and  laid  more  facts  under  tribute  to  prove  his  point.  In 
his  "Principles  of  Science"  of  1874  he  traced  out  a 
system  of  logic  at  once  comprehensive  and  bold.  De- 
viating from  J.  S.  Mill  he  regarded  deduction  (through 
substitution)  as  the  arch-type  of  all  forms  of  inference 
and  showed  the  element  of  mere  probability  characterizing 
our  knowledge.  Probability  to  him  was  the  core  of  sci- 
entific reckoning,  and  the  average  a  most  important  con- 
cept. It  was  hence  no  accident  that  he  pictured  price  as  a 
resultant  average  of  many  individual  and  variable  prefer- 
ences competing  in  the  open  market.  He  never  recanted 
his  original  theorem  that  economics  deals  with  measur- 
able quantities ;  but  for  this  reason  also  the  difficulties 
facing  a  conscientious  economist  were  held  to  be  great. 

To  state  his  position  in  a  few  words :  "The  final  degree 
of  utility  is  that  function  upon  which  the  theory  of  eco- 
nomics will  be  found  to  turn.'*  ^^  "The  last  increments  in 
an  act  of  exchange  must  be  exchanged  in  the  same  ratio 
as  the  whole  quantities  exchanged."  ^^  The  price  law  is 
a  "law  operating  in  the  case  of  multitudes  of  individuals 
which    gives    rise   to    the    aggregate    represented    in    the 

"  Theorv  of  Political  Economy,  p.  56. 
'"  Page  102. 


244     THE  DEVELOPMENT  OF  ECONOMICS 

transactions  of  a  nation."  ^^  But  still  further,  he  sought 
to  bridge  the  gap  between  the  objective  and  subjective 
analysis  of  value,  informing  us  that  "articles  will  ex- 
change in  quantities  inversely  as  the  costs  of  production 
of  the  most  costly  portions,  i.  e.,  the  last  portions 
added."  ^^  And  finally  it  was  he  also  who  set  an  example 
for  a  productivity  view  of  interest  in  the  words :  "The 
interest  of  capital  is  the  rate  of  increase  of  the  produce 
divided  by  the  whole  produce."  ^^ 

So  far  the  founders  of  Marginism.  What  developed 
after  1875  may  be  stated  in  comparatively  brief  space  so 
long  as  we  have  in  mind  only  the  essentials  that  became 
an  integral  part  of  the  system.  Contributions  since  then 
have  come  as  much  by  way  of  criticism,  especially  during 
the  last  decade,  as  in  direct  and  intentional  furtherance 
of  it.  Marginism  found  few  friends  in  France  and  Italy, 
unless  one  were  to  reckon  all  mathematical  expositions  as 
a  proof  of  Marginism,  a  point  difficult  to  defend.  In 
Germany  and  England  its  reception  was  more  cordial, 
yet  even  there  not  unmixed  with  misgivings.  So  it  is  in 
Austria  and  in  the  United  States  that  Marginism  may  be 
said  to  have  become  lodged  most  firmly,  in  the  former 
country  from  1870  on,  in  the  latter  only  toward  the  end 
of  the  century. 

Economics  in  America. — American  economics,  like 
that  of  other  countries,  bore  the  marks  of  the  environ- 
ment in  which  it  grew  up.  Prior  to  the  Civil  War  moral 
philosophy  was  still  the  customary  unit  of  study  anent 
everything  not  natural  science  or  mathematics.  Chairs 
of  economics  hardly  existed  before  1870.  Important  con- 
tributions liad  been  made  by  thinkers  such  as  Raymond, 
Rae — whose  influence  however  was  slight  for  the  moment, 

"  IntrfKluction,  p.  17. 
"  r.-iRc  203. 
"  Page  207. 


MARGINISM  245 

— Carey,  E.  P.  Smith,  and  Bowen,  but  without  serving 
as  a  nucleus  for  a  compact  system  except  in  the  case  of 
H.  C.  Carey.  Carey  was  the  outstanding  figure  in  early 
American  economic  or  sociological  thought.  His  inter- 
ests covered  the  whole  realm  of  philosophical  inquiry 
and  enabled  him  to  offer  effective  resistance  to  Malthu- 
sianism  and  Ricardianism  when  at  the  very  pinnacle  of 
their  fame.  John  Rae,  a  Scotch  emigrant,  was  the 
author  of  the  "Statement  of  Some  New  Principles  on  the 
Subject  of  Political  Economy,  Exposing  the  Fallacies 
of  the  System  of  Free  Trade,  and  of  Some  Other  Doc- 
trines Maintained  in  the  'Wealth  of  Nations'  [of  Adam 
Smith],"  1834.  Few  books  of  that  time  went  more 
thoroughly  into  the  relation  of  value  to  wealth,  or  of 
both  to  capital,  or  of  all  three  to  human  progress.  But 
nothing  came  of  his  labors  for  the  time  being.  Henry 
George  scored  a  victory  with  his  "Progress  and  Poverty," 
1879,  yet  it  would  be  difficult  to  assign  him  a  definite 
place  either  in  American  or  in  European  economics  as 
a  science.  His  outlook  was  historical,  but  his  superi- 
ority lay  in  the  application  of  a  single  idea,  taken  out  of 
earlier  systems,  to  a  popular  question.  As  for  the  rest 
of  the  group  that  might  be  mentioned  by  name,  they  either 
built  on  English  models,  or  else  echoed  the  sentiments  of 
Carey.  The  dominant  interest  was  practical,  a  reflection 
of  commercial  policies,  problems  on  taxation,  public  do- 
main, currency  and  banking,  as  they  existed  during  this 
period. 

After  the  Civil  War  however  the  appreciation  of 
abstract  questions  grew.  The  economic  development  of 
a  nation  blessed  with  unparalleled  resources  and  teeming 
millions  continually  augmented  from  abroad  gave  rise  to 
needs,  to  opportunities  in  leisure,  that  could  hardly  fail 
of    expression    in    economic    literature.      Railroads    and 


246    THE  DEVELOPMENT  OF  ECONOMICS 

steamships  began  to  bind  east  and  far  west  as  stage  coach 
or  clippers  skirting  the  coasts  could  not  have  done. 
Industry  was  put  on  a  broad  basis  by  the  discovery 
of  new  natural  riches,  as  well  as  by  mechanical  and  scien- 
tific inventions  largely  due  to  native  ingenuity.  The 
"frontier"  gradually  was  pushed  out  to  the  Pacific,  so 
that  a  land  problem  might  very  well  arise.  Capital  went 
into  non-agricultural  improvements  mainly.  A  lion  share 
went  to  public  utilities,  to  mines,  to  factories,  and  to  the 
development  of  city  life.  Congestion  became  more  con- 
spicuous along  the  eastern  side  of  the  Appalachians  than 
sparseness  of  population  in  the  Mississippi  valley.  Large 
scale  production  supplanted  the  former  meager  attempts 
at  a  supply  of  neighborhood  demands.  A  proletariat 
emerged  out  of  this  industrialization  of  capital  and 
energy,  not  so  very  different  from  what  Europe  had  to 
grapple  with,  but  possibly  more  self-conscious  because 
of  its  youth  and  comparative  well-being.  Foreign  pol- 
icies still  were  a  minor  issue,  but  there  was  plenty  to  think 
about  that  might,  directly  or  indirectly,  turn  on  economic 
theory. 

What  is  more,  young  men  went  to  Europe  to  get  a 
higher  education  or  to  finish  their  studies  in  special  lines. 
Germany  became  a  haven  for  many  who  sought  light  on 
sociological  questions.  And  when  these  returned  the  ma- 
terial was  at  hand  for  university  research  at  its  best,  in 
quantities  that  since  then  have  revolutionized  popular 
ideas  on  most  things  economic.  Between  1885  and  1890 
economics  became  a  profession  to  whicli  increasing  num- 
bers devoted  their  talent  and  time.  In  1883  the  Johns 
Hopkins  University  Studies  in  History  and  Political 
Science  began  to  appear.  In  1884  the  American  His- 
torical Association  had  been  founded.  In  1886  followed 
the  American  Economic   Association  whose  publications 


MARGINISM  247 

have  filled  long  shelves  in  the  libraries.  In  the  same  year 
also  the  Political  Science  Quarterly  was  launched,  and 
the  next  year  the  Quarterly  Journal  of  Economics.  In 
1890  was  founded  the  American  Academy  of  Political 
and  Social  Science;  in  1892  the  Journal  of  Political 
Economy,  and  in  1895  the  American  Journal  of  Soci- 
ology. Thus  within  a  very  few  years  societies  had  sprung 
up  whose  labors  found  space  in  scientific  journals,  in 
book  form,  and  in  the  daily  press. 

The  prevailing  tone  of  this  American  movement,  if  one 
may  judge  from  its  printed  output,  was  at  first  historical 
and  in  a  measure  even  paternalistic.  The  influence  of 
German  ideas  was  not  shaken  off  in  a  trice.  It  was  not 
likely  that  it  would  be.  However,  Anglo-Saxon  ancestry 
counted  ere  long.  The  triumph  of  Marginism  between 
1890  and  1905  is  excellent  evidence  for  the  impossibility 
of  grafting  Historism  on  to  foreign  stock.  Though 
strong  in  Germany  it  was  not  after  all  capable  of  satis- 
fying the  demands  of  a  newer  and  larger  country  where 
the  past  was  short  and  the  future  so  big  witli  possibilities. 
Marginism  made  headway  most  rapidly  where  the  His- 
torical movement  could  not  tlirive :  In  Austria  and  in  the 
United  States,  but  not  on  German  ground  where  meta- 
physics had  so  eloquently  presented  the  present  as  merely 
a  by-product  of  the  past.  As  events  have  taught  us,  it 
was  easy  to  pass  from  Utilitarianism  to  Marginism,  but 
to  convert  the  Historical  group  was  a  task  attended  with 
almost  insuperable  difficulties. 

Marginism  thus  made  progress  in  America,  even 
though  the  believers  in  Historism  or  in  a  revised  Utili- 
tarian doctrine  carried  on  their  own  work  with  undi- 
minished vigor.  All  three  phases  were  duly  studied  and 
incorporated  in  systematic  treatments  of  economics ;  but 
Marginism  was  given  most  serious  consideration. 


248    THE  DEVELOPMENT  OF  ECONOMICS 

In  Austria  the  Marginal  system  received  its  finishing 
touches  at  the  hands  of  Wieser  and  Bohm-Bawerk.  By 
1889  little  remained  to  be  done.  In  Germany  all  that  was 
essential  had  been  said  by  1895,  and  in  America  by  the 
end  of  that  decade.  The  development  in  general  followed 
the  lines  sketched  out  by  the  pioneers  before  1875.  The 
pricing  problem  was  first  solved  so  as  to  comprise  all 
classes  of  goods,  some  services  included.  From  a  bare 
contrasting  of  costs  and  utilities  the  analysis  went  on  to 
fix  the  price  for  each  exchange  of  goods  under  conditions 
roughly  true  to  facts.  The  distributive  aspects  were 
next  discussed  from  various  angles,  the  break  with  Utili- 
tarian laws  being  gradual,  though  inevitable  because  of 
the  subjective  definitions  which  conformed  strictly  to  a 
competitive  regime.  Exact  measurements  were  aimed  at 
and  confidently  undertaken  as  descriptive  of  principles 
universally  valid.  Exceptions  were  noted,  but  did  not 
make  serious  inroads, — so  it  was  held, — upon  the  main 
argument.  Marginism  as  a  static  entcrpreneur  statement 
of  value  and  distribution  constituted  the  core  of  the  sci- 
ence of  economics.  Applications  were  found  for  questions 
of  public  finance,  of  wage  regulation,  and  a  theory  of  con- 
-sumption.  All  in  all,  progress  was  rapid  and  gratifying 
to  those  who  thought  of  economics  chiefly  as  a  concep- 
tual science,  somewhat  on  the  order  of  mathematics,  the 
need  of  verification  and  an  adequate  methodology  not 
appearing  urgent.  The  abundance  of  treatises  on  Value 
and  Distribution,  or  on  Principles  of  Economics  which 
pivoted  mainly  about  a  Marginal  price  analysis,  is  suf- 
ficient evidence  of  the  esteem  enjoyed  by  the  new  doc- 
trine, in  America  fully  as  much  as  in  the  Old  W'^rld. 

Psychology  of  Marginism. — The  strength  of  Marginism 
was  for  one  thing  its  psj'chologlcal  basis  which  men  like 
Jennings  and  Jevons  took  special  pains  to   make  clear. 


MARGINISM  249 

but  on  the  other  hand  also  the  superiority  of  Mill's  logic 
over  that  of  Historism.  What  Menger,  the  chief  ex- 
pounder of  Marginal  method,  said  in  his  widely  read  essay, 
was  no  great  advance  over  the  Utilitarian.  Nothing  was 
said  on  this  subject  by  Marginists  that  could  compare 
with  the  penetrating  treatment  of  J.  S.  Mill.  However, 
just  because  the  one  was  for  the  most  part  a  review  of 
the  earlier  work  (with  slight  changes  here  and  there), 
Marginism  won  its  case.  There  was  no  need  of  discard- 
ing the  traditional  methodology.  Only  Historism  had  to 
do  that,  and  was  so  much  the  worse  off  for  it.  The 
Austrian  school  could  adapt  the  approved  deductive 
logic  easily  to  its  own  ends,  for  like  Utilitarianism  it 
preached  statics  and  competitive  rights.  The  individual 
remained  the  unit  of  action  and  of  values. 

Again,  it  was  not  the  German  nation  that  gave  Mar- 
ginism a  solid  foundation  in  psychology.  In  this  respect 
too  the  credit  belongs  entirely  to  England,  the  land  of 
empiricism  par  excellence,  and  of  innumerable  volumes 
on  Human  Nature,  on  the  relation  of  ethics  to  the  emo- 
tions, of  economic  law  to  primal  instincts.  It  was  indeed 
symptomatic  that  Walras  observed  silence  on  this  topic, 
that  the  Austrians  barely  alluded  to  it,  and  that  in  Eng- 
land it  received  careful  consideration  from  the  start.  It 
would  seem  the  very  abundance  of  material  there  aroused 
a  sense  of  responsibility,  for  had  not  the  Utilitarians 
reverted  again  and  again  to  those  fundamental  traits 
that  governed  all  social  phenomena? 

The  psychology  of  Marginism  is  British  and  not  of 
the  continent.  In  spite  of  the  fact  that  Herbart  had 
given  new  life  to  the  "faculty"-psychology  of  the  ideal- 
istic philosophy,  in  spite  of  the  discoveries  of  Weber 
and  Fechner,  in  spite  of  the  predominance  which  Germany 
was  to  acquire  in  this  field  after  1870,  economists  turned 


250    THE  DEVELOPMENT  OF  ECONOMICS 

in  England  knowingly,  elsewhere  perhaps  unwittingly,  to 
the  thoughts  of  Hume,  Hartley,  and  the  two  Mills. 
Gossen  and  Menger  made  nothing  of  the  psychological 
presuppositions  with  which  they  were  working;  nor  did 
Walras  in  1874.  Jennings,  on  the  contrary,  hardly  gets 
away  from  them,  and  Jevons  accorded  them  a  conspicu- 
ous place  both  in  the  first  and  in  the  second  edition  of 
his  "Theory." 

Hobbes  deserves  quoting  once  more,  if  only  to  show  the 
antiquity  of  a  fundamental  thought  in  Marginism,  or 
possibly  one  should  say,  in  order  to  illustrate  again  how 
near  great  thinkers  have  come  to  novel  ideas  without 
fully  realizing  it.  In  the  "Leviathan"  he  had  written: 
"The  value  of  all  things  contracted  for  is  measured  by 
the  appetite  of  the  contractors,  and  therefore  the  just 
value  is  that  which  they  be  contented  to  give."  ^^  That 
was  in  1651.  In  1785  Paley,  the  author  of  "The  Princi- 
ples of  Moral  and  Political  Philosophy,"  remarked  that 
"pleasures  by  repetition  lose  their  relish.  It  is  a  prop- 
erty of  the  [human]  machine,  for  which  we  know  no 
remedy,  that  the  organs  by  which  we  perceive  pleasure 
are  blunted  and  benumbed  by  being  frequently  exercised 
in  the  same  way."  .  .  .  "The  truth  seems  to  be  that  there 
is  a  limit  at  which  these  pleasures  soon  arrive,  and  from 
which  they  ever  afterwards  decline.  They  are  by  neces- 
sity of  short  duration,  as  the  organs  cannot  hold  on  their 
emotions  beyond  a  certain  length  of  time ;  and  if  you 
endeavor  to  compensate  for  this  imperfection  in  their 
nature  by  the  frequency  with  which  you  repeat  them,  you 
suffer  more  than  you  gain,  by  tlie  fatigue  of  the  faculties 
and  the  diminution  of  sensibility."  "''' 

Jennings  in  his  most  stimulating  "Natural  Elements 

"Edition  of  IfiHl,  p.  75. 
"Book  I,  ch.  6. 


MARGINISM  251 

of  Political  Economy,"  1855,  acknowledged  at  once  his 
indebtedness  to  men  like  Locke,  Hartley,  D.  Stewart,  Th. 
Brown,  R.  Whately,  Carpenter,  J.  F.  W.  Herschel,  and 
Jas.  Mill.  He  deplored  the  indifference  of  economists  to 
this  crucial  problem  in  their  field,  namely  the  problem  of 
what  psychology  had  really  to  say  about  wants  and  valu- 
ations. To  him  the  social  origin  of  values  is  self-evident 
and  of  paramount  significance.  "Human  communities," 
he  wrote,  "are  living  organisms,"  ~^  and  nothing  could  be 
true  of  the  individual  but  it  must  apply  in  large  measure 
to  social  interrelations,  the  economic  not  excluded.  Hence 
the  need  for  an  inquiry  into  the  roots  of  human  designs 
of  which  the  Ricardians  seemed  so  blissfully  ignorant. 
Or  rather,  what  the  orthodox  group  took  for  granted 
should  be  explored  lest  false  conclusions  were  drawn  that 
might  satisfy  the  requirements  of  a  syllogism,  but  not 
the  best  reason  of  statesmen  responsible  for  human 
welfare. 

Jennings  therefore  restates  the  old  Locke-Hartley- 
Hume-Mill  theory  of  consciousness,  deriving  ideas  from 
sensation  and  impressions  from  ideas  in  Hume's  style, 
making  of  ideas  copies  of  perception  due  to  a  sensation  ex- 
ternally aroused.  Of  simple  ideas  compound  ones  are  con- 
structed. Association  binds  ideas  into  chains  so  that 
the  re-arousal  of  any  one  link  will  entail  the  recollection 
of  the  other  members  in  the  series.  Brown's  contention 
that  not  only  ideas,  but  feelings  too  are  subject  to  this 
principle  is  greeted  with  applause  as  helping  materially 
in  the  investigation.  Feelings  are  ideas  felt  again,  as 
they  were  once  felt  through  primary  sensation.  The  bulk 
of  feelings  consist  of  the  category  pleasure  and  pain. 
Feelings,  like  Hume's  perceptions,  vary  in  liveliness  or 
intensity  and  duration,  our  idea  of  a  former  sensation 

-^  Natural  Elements,  p.  61. 


252    THE  DEVELOPMENT  OF  ECONOMICS 

reflecting  commonly  such  differences.  Remembrances  of 
pleasure  engender  conative  forces,  motives  whose  popular 
name  is  wish,  wishes  being  the  more  intense  the  oftener 
their  prototype  has  recurred,  and  the  stronger  the  sensa- 
tion. Man  desires  pleasure  naturally;  because  of  asso- 
ciations want  and  action  arise  even  when  the  original 
object  of  desire  is  absent. 

This  Hartley-Humian  view  of  consciousness,  learning, 
and  the  emotions  had  been  taken  over  by  James  Mill  and 
rounded  out  into  a  comprehensive  "Analysis  of  the 
Phenomena  of  the  Human  Mind,"  of  which  something  has 
already  been  said  a  propos  of  Utilitarianism.  Mill  wrote 
among  others  the  following  significant  passages :  "All 
sensations  are  capable  of  being  revived."  ^^  "An  idea  is 
the  revival  of  a  former  state  of  feelings."  ^^  Ideas  are 
feelings  "which  exist  after  the  object  of  sense  has  ceased 
to  be  present."  ^^  Ideas  of  the  causes  on  pleasurable  and 
painful  sensations  are  "never  ideas  of  the  causes  sepa- 
rately, but  ideas  both  of  the  causes  and  of  their  effects, 
inseparably  joined  by  association.  They  are  therefore 
always  either  pleasurable  or  painful,  being  complex  ideas, 
to  a  great  degree  composed  of  the  ideas  of  pleasurable 
and  painful  sensations."  ^°  "The  anticipation  of  a  future 
sensation  is  merely  the  association,  the  result  of  prior 
sensations,  of  a  certain  number  of  antecedents  and  conse- 
quents." ^^     "A  motive  is  an  idea  of  a  pleasure."  ^- 

Jennings  not  only  understood  these  chapters  of  James 

Mill,  but   accepted  them   as   true  and   applicable   to   his 

own   economic    intents.      He   followed   pretty   nearly   the 

whole   length   of   the   argument,   and   then   drew   further 

"  Analysis  of  the  Phenomena  of  the  Human  Mind,  edit,  of  1869,  ch. 
19. 

"  Ibidem. 

"  Vol.  1,  ch.  2, 

"Ch.  24. 

"  Ch.  22. 

"  Fragment  on  Mackintosh. 


MARGINISM  253 

conclusions ;  such  as  that  our  penchant  to  save  is  the 
result  of  associating  pleasure  with  production  goods, 
although  at  the  start  man  thought  of  nothing  but  the 
consumption  good.^^  He  inferred  that  pleasure  leads  to 
valuation,  and  this  to  desire,  and  this  in  turn  to  action  or 
exchange.  He  wrote:  "By  memory,  confidence  in  the 
future,  comparison  and  abstraction,  acting  under  the  ever 
present  influence  of  Combination  [i.  e.,  association] — the 
feeling  of  satisfaction  eventually  grows  into  the  concep- 
tion of  value.  .  .  ."  ^^  Prices  had  to  vary  with  satisfac- 
tions. There  was  no  alternative  to  this  law.  In  short, 
Jennings*  view  was  not  that  of  the  evolutionist  who  at- 
taches race-preserving  values  to  selfishness,  but  that  of 
a  thinking  eighteenth  century  man  who  was  groping  for 
light  on  the  problem  of  good  and  evil,  respectively  of 
valuations  economic. 

Jevons,  in  the  important  third  chapter  of  his  "Theory 
of  Political  Economy,"  expressed  his  sense  of  obligation 
to  Jennings  who  had  "most  clearly  appreciated  the 
nature  and  importance  of  the  law  of  utility,"  i.  e.,  of 
diminishing  satisfaction.  It  was  a  characteristic  of 
Jevons  to  give  credit  to  whom  it  was  due,  openly  and 
generously.  However,  while  Jennings  undoubtedly  influ- 
enced Jevons,  particularly  by  his  lucid  presentation  of 
the  Hartley-Hume  theory  of  consciousness  which  no  other 
economist  had  previously  applied  with  so  much  force  to 
the  question  of  value,  the  chief  support  of  Jevons  was 
Bentham.  Hume  and  Paley,  Banfield,  the  precursors  of 
the  mathematical  group  of  economists,  these  and  many 
French  writers  were  cited  in  the  "Theory."  But  the  chief 
burden  lay  on  Bentham  and  James  Mill,  the  latter*s 
"Analysis  of  the  Phenomena  of  the  Human  Mind"  having 

"  Natural  Elements  of  Political  Economy,  pp.  189-92. 
"  Pages  181-82. 


254    THE  DEVELOPMENT  OF  ECONOMICS 

been  given  the  benefit  of  A.  Bain's  comment.  Through 
Jevons,  in  this  manner,  the  Utilitarian  psychology  crept 
into  the  Marginal  interpretation.  With  hardly  an  excep- 
tion the  Marginists  admitted  the  hedonistic  basis  of  their 
system.  Without  presenting  it  in  detail,  as  Jennings  and 
Jevons  made  bold  to  do,  its  real  significance  for  the  main 
argument  was  nevertheless  recognized.  The  position  of 
Jevons  therefore  has  turned  out  to  be  a  crucial  one  from 
the  standpoint  of  methodology,  although  its  larger  as- 
pects of  course  received  more  competent  consideration  at 
the  hands  of  Menger. 

Three  main  questions  must  be  distinguished  in  the 
psychological  problem  as  Marginism  might  have  under- 
stood it,  and  often  did  understand  it.  The  first  was :  How 
could  sensations  become  wishes?  The  second:  What  was 
the  means  for  measuring  either  or  both?  The  third: 
Should  the  facts  established  be  used  for  a  theory  of 
ethics?  One  cannot  do  better  than  to  keep  these  three 
questions  separate,  for  to  the  economis-t  only  the  first  two 
were  of  paramount  significance.  As  it  happened,  to  be 
sure,  Jevons  himself  was  a  Utilitarian  In  the  narrower 
sense  who  had  "no  hesitation  in  accepting  the  Utilitarian 
theory  of  morals  which  does  uphold  the  effect  upon  the 
happiness  of  mankind  as  the  criterion  of  what  Is  right 
and  wrong,"  provided  one  put  "the  widest  and  highest 
interpretation  upon  the  terms  used."  ^^  However,  the 
majority  of  Marginists  were  not  interested  In  this  side 
of  the  matter.  They  disagreed  with  the  Benthamites  or 
even  with  J.  S.  MIlFs  essay  on  "Utilitarianism,"  yet  re- 
mained ardent  disciples  of  the  viewpoint  first  developed 
by  the  five  founders.  But  the  vital  fact  is  this,  that 
one  was  not  at  all  obliged  logically  to  assent  to  ethical 

"Theory  of  Political  Economy,  2.  edit.,  1879,  Introduction. 


MARGINISM  256 

applications  of  hedonism,  when  making  it  the  basis  of  an 
economic  valuation. 

Now  Jevons  did  not  consider  the  first  question,  viz., 
how  could  sensations  become  wishes,  as  fully  as  Jennings. 
He  did  not  repeat  the  familiar  argument  of  Hartley  and 
Hume  or  James  Mill,  except  in  fractions  here  and  there 
a  propos  of  what  was  uppermost  in  his  mind,  namely  the 
measurement  of  feelings.  Jevons  took  it  for  granted  that 
sensations  are  the  root  of  all  ideas,  that  ideas  are  either 
simple  or  compound,  that  feelings  are  necessarily  of  three 
kinds  as  Bentham  had  pointed  out,  and  that  emotions 
are  aroused  by  ideas  which  themselves,  just  like  feelings, 
obey  certain  fundamental  laws  of  association.  Feelings 
had  to  be  either  pleasant  or  disagreeable  or  indifferent, 
the  former  two  being  in  an  overwhelming  majority. 
Through  association  it  was  possible,  nay  inevitable,  that 
one  could  think  of  things  not  directly  presented  to  the 
senses ;  and  furthermore,  the  remembrance  of  a  pleasant 
sensation  could  be  linked  up  with  an  object  not  itself  re- 
sponsible for  it.  Means  to  pleasure,  as  eighteenth  cen- 
tury empiricists  had  shown,  could  become  ends  by  a 
process  of  transference  of  ideas. 

What  of  wishes  then.''  It  was  a  commonplace  among 
English  ps^^chologists  that  the  re-arousal  of  an  idea,  say 
by  association,  brought  with  it  an  echo  of  the  original 
sensation  or  emotion  coupled  with  it.  First  perceptions 
could  be  restored  in  this  way.  Feelings  were  revived,  and 
just  as  at  the  original  experience  an  aversion  or  wish 
resulted,  accompanied  by  suitable  action,  so  upon  revival 
of  the  emotion  the  impulse  came  back.  Desire  was  the 
child  of  ideas,  of  remembrances  of  pleasurable  sensations. 
Hence,  to  make  a  long  story  short,  primary  impressions 
received  by  the  infant  were  transformed  into  habitual 
wishes  directed  either  toward  a  possession  of  the  original 


256     THE  DEVELOPMENT  OF  ECONOMICS 

stimulus,  or  toward  such  others  as  by  association  seemed 
equally  worth  while.  Consciousness  turned  on  the  acquisi- 
tion of  pleasure-exciting  things  because  these  and  the 
disagreeable  experiences  formed  the  great  bulk  of  human 
experience. 

For  this  reason  Jevons  could  say  that  his  economics 
was  "entirely  based  on  a  calculation  of  pleasure  and 
pain,"  that  it  was  a  "mechanics  of  utility  and  self- 
interest."  ^®  For  this  reason  also  his  comparison  of 
anticipation  and  realization  was  intelligible,  for  it  was  a 
special  case  of  the  general  relation  between  sensations 
and  centrally  aroused  emotions.  Since  ideas  came  from 
perceptions,  and  since  association  regulated  most  of  our 
feelings  and  judgments,  the  expectation  of  a  pleasure  was 
a  function,  as  JeVons  remarked,  of  past  pleasure  and 
future  actual  pleasure.  "The  intensity  of  present  an- 
ticipated feeling  must  ...  be  some  function  of  the  fu- 
ture actual  feeling  and  of  the  intervening  time,  and  it 
must  increase  as  we  approach  the  moment  of  realiza- 
tion." ^^  Upon  this  power  of  anticipation,  we  are  re- 
minded, "is  based  all  accumulation  of  stocks  of  commodity 
to  be  consumed  at  a  future  time."  ^^  Curiously  enough, 
Jevons  did  not  use  this  concept  for  an  agio-theory  of 
interest.  He  was  more  interested  in  the  balance  between 
physical  increments  due  to  capital  and  the  pain  of  ab- 
stinence than  in  time-preference  by  itself;  but  a  sugges- 
tion certainly  had  been  made  that  others  could  turn 
to  good  account. 

Having  then  concluded  by  way  of  a  quotation  from 

Bain  that  "our  volvmiary  activity  [italics  mine]  is  moved 

by  only  two  great  classes  of  stimulants,  and  that  either 

pleasure  or  pain,  present  or  remote,  must  lurk  in  every 

»'  Ibidem. 
"  Ch.  3. 
"Ch.  2. 


MARGINISM  267 

situation  tliat  drives  us  into  action,"  Jevons  adopted  in 
body  the  Benthamite  doctrine  of  feelings  as  quantities, 
and  nothing  but  quantities.  The  second  chapter  of  the 
"Theory"  was  designed  to  prepare  the  reader  for  argu- 
ments grounded  on  this  assumption.  Bentham's  "Intro- 
duction to  the  Principles  of  Morals  and  Legislation" 
served  as  a  starting  point  for  the  exact  measurement  of 
feelings,  and  from  Bain's  "The  Emotions  and  the  Will," 
1859,  he  quoted:  "When  pain  is  followed  by  pleasure 
there  is  a  tendency  in  the  one,  more  or  less,  to  neutralize 
the  other."  ^^  To  be  sure,  Jevons  doubted  whether  "men 
will  ever  have  the  means  of  measuring  directly  the  feelings 
of  the  human  heart.  A  unit  of  pleasure  or  of  pain  is 
difficult  even  to  conceive,"  ^"^  and  so  on.  But  the  way  out 
manifestly  was  to  predicate  a  constant  quantitative  rela- 
tion between  feelings  and  the  actions  resulting  from 
them.  "It  is  from  the  quantitative  effects  of  the  feelings 
that  we  must  estimate  their  comparative  amounts."  ^^ 
"The  will  is  our  pendulum,  and  its  oscillations  are 
minutely  registered  in  the  price  lists  of  the  markets."  *^ 
"Pleasures,  in  short,  are  for  the  time  being  as  the  mind 
estimates  them,  so  that  we  cannot  make  a  choice  or 
manifest  the  will  in  any  way  without  indicating  thereby 
an  excess  of  pleasure  in  some  direction."  *^  Again:  "Just 
as  we  measure  gravity  by  its  effects  in  the  motion  of  a 
pendulum,  so  we  may  estimate  the  equality  or  inequality 
of  feelings  by  the  decisions  of  the  mind."  "^^ 

All  of  which  meant  that  the  proof  of  pleasure  in  an 
action  was  our  willingness  to  act ;  or  to  put  it  differently, 
that  the  degree  of  intensity  of  wanting  something  was 

5*  Ibidem. 
*"  Introduction. 
"  Ibidem. 
"  Ibidem. 
"  Ibidem. 
"  Ibidem, 


Ji58     THE  DEVELOPMENT  OF  ECONOMICS 

measurable  by  what  we  forewent  In  other  pleasure,  or 
suffered  in  physical  or  mental  pain.  Thus :  "Anything 
which  an  individual  is  found  to  desire  and  to  labor  for 
must  be  assumed  to  possess  for  him  utility."  *^  It  is  "a 
convenient  name  for  the  aggregate  of  the  favorable  bal- 
ance of  feeling  produced — the  sum  of  the  pleasure  cre- 
ated and  the  pain  prevented."  ^"^  "The  intensity  of  feel- 
ing," correspondingly,  "must  mean  the  instantaneous 
state  produced  by  an  elementary  or  infinitesimal  quan- 
tity of  a  commodity  consumed."  ^^  The  act  itself  of  pur- 
chase or  of  use  testified  to  the  reality  of  a  new  addition 
of  pleasure,  and  a  commodity,  "if  consumed  by  a  per- 
fectly wise  being,  must  be  consumed  with  a  maximum 
production  of  utility."  ^^  In  this  spirit  Jevons  ap- 
proached the  task  of  equalizing  feelings  and  appraisals 
of  wealth.  Feelings  were  to  be  gauged  indirectly. 
Prices  alone  could  inform  us  as  to  want  intensities,  but 
since  these  were  bound  to  represent  increments  of  pleas- 
ure and  degrees  of  utility,  utilities  at  the  margin  could 
be  said  to  "determine"  prices.  The  old  utility  notion  of 
Senior  and  others  which  Jevons  had  particularly  in 
mind,  was  thus  made  available  for  measurements  that 
Utilitarianism  had  not  dreamed  of. 

Other  Marginists  accepted  the  hedonistic  postulate  and 
until  recent  times  did  not  question  its  worth.  If  Gossen 
had  said,  in  the  opening  sentence  of  his  book,  that  "man 
wants  to  enjoy  life  and  makes  it  his  chief  aim  to  maxi- 
mize happiness,'*  ^^  Wieser  in  his  "On  tlie  Source  and 
the  Principal  Laws  of  Economic  Value,"  1884,  also  as- 
serted that  "the  wants  of  an  artist  differ  only  in  degree 

«Ch.  3. 
**  Ibidem. 
*'  It)id(-in. 
"  Ibidem. 

*"  See  Entwicklung  der  Gesetzo  des  Menschllchen  Verkehrs,  pp.  4-5, 
12,  23. 


MARGINISM  259 

from  those  of  a  hungry  beggar."  '^^  Marginism,  he  con- 
fessed, was  an  application  of  psychological  tenets,  though 
the  precise  nature  of  this  application  was  dismissed 
with  a  hare  mention  of  the  Weber-Feclmer  experiments. 
Pareto,  in  his  "Manual  of  Political  Economy,"  1879,  ex- 
pressly singled  out  exchange-valuations  from  the  moral 
and  theological  ^^  as  being  the  only  measurable  ones — 
i.  e.,  measurable  in  the  sense  Jevons  had  himself  explained. 
A  little  later  Pantaleoni  declared:  "Economic  science 
consists  of  the  laws  of  wealth  systematically  deduced 
from  the  hypothesis  that  men  are  actuated  exclusively 
by  the  desire  to  realize  the  fullest  possible  satisfaction 
of  their  wants  with  the  least  possible  individual  sacri- 
fice." ^^  And  perhaps  it  would  not  be  out  of  the  way  to 
close  with  a  passage  from  a  noted  critic  of  the  static 
Marginal  system  who  nonetheless  believed  that  "a  theory 
of  prosperity  assumes  not  only  that  pleasures  and  pains 
are  commensurable,  but  also  that  a  comparison  can  be 
made  between  the  pleasures  and  pains  of  individuals  liv- 
ing during  different  periods."  ^^  Thus  had  the  Utili- 
tarian psychology  taken  possession  of  Marginists  of  va- 
rious shades  who  endeavored  to  preserve  for  economics 
its  scientific  character ! 

Wants,  feelings,  utilities,  pleasures,  happiness,  and 
purchase  were  all  one.  An  equation  was  invented  for 
ideas  and  desires,  for  price  and  pleasure,  for  emotion  and 
estimates,  and  in  some  quarters  even  for  pleasures  and 
virtue.  Ideas  through  desires  dominated  preferences  for 
goods.  Rates  of  exchange  furnished  prima  facie  evi- 
dence of  the  relative  intensities  of  wants.  A  rational 
egoistic  ^'economic  man"  took  precedence  over  all  other 

^  Ursprung  und  Hauptgesetze  des  Wirtschaftlichen  Werthes,  p.  147. 
"  Manuel  d'Economie  Politique.  1909.  p.  145  :  ch.  2,   §  108. 
"  Pure  Economics,  transl.  by  Bruce,  T.  B.,  1898,   p.  7. 
"  Article  on  Cost  and  Utility  by  Patten.  S.  N.,  in  Annals  of  American 
Academy  of  Political  and  Social  Science,  vol.  Ill   (1892-93),  p.  410. 


260     THE  DEVELOPMENT  OF  ECONOMICS 

human  factors  in  society.  Because  of  certain  laws  of 
mind  which  escaped  our  control  economics  was  in  a  po- 
sition to  formulate  definite  propositions  regarding  price, 
income,  and  productivity.  Economists,  in  describing 
these  laws,  did  their  whole  duty  even  though  some  of  the 
most  vital  questions,  from  another  standpoint,  were  not 
answered. 

Marginism  and  Ethics.  — For  instance,  the  ethical  as- 
pect of  social  life  or  of  individual  conduct  was  not  con- 
sidered by  the  majority  of  Marginists  a  part  of  their 
science.  The  maxim  of  Bentham  that  pleasure  and  hap- 
piness are  the  same  thing,  and  that  virtue  has  no  exist- 
ence except  in  the  attainment  of  happiness  did  not  find 
many  friends  among  the  successors  of  Utilitarianism. 
The  philosophy  of  Bentham  and  Mill  was  British,  and 
not  of  the  continent.  In  France,  to  be  sure,  it  had 
gained  some  vogue  and  expressed  itself  rather  effectively 
in  Comte's  Positivism.  However,  it  should  not  be  over- 
looked that  even  Comte's  teachings  terminated  in  mys- 
ticism. In  Germanic  lands  it  had  never  found  much 
favor.  Scientific  socialism  came  nearest  to  it,  but  the 
idea  of  a  cosmic  law  of  changes,  according  to  which  eco- 
nomic stages  determine  non-economic  life,  deprived  it 
of  its  original  meaning;  for  the  course  of  history  was 
beyond  human  will ;  responsibility  lay  with  the  individ- 
ual only  in  the  sense  that  variations  in  thought  and  deed 
seemed  to  the  individual  self-regulated.  In  reality  sci- 
ence taught  differently. 

Marginism  thus  grew  up  in  an  environment  that  took 
its  morals  from  the  transcendentalists  and  theologians. 
The  universities  at  which  the  Austrians  or  Walras  re- 
ceived their  training  were  idcalistically  toned  and  under 
the  sway  of  ideas  alien  to  Benthamism.  If  even  in 
England,  as  was  shown  earlier,  many  Utilitarian  econo- 


MARGINISM  261 

mists  preached  an  ethical  absolutism,  this  was  still 
more  the  case  among  the  Europeans  and  the  Americans. 
Metaphysics,  Puritanism,  the  Bible,  Christian  dogma,  and 
the  natural  penchant  of  men  for  a  lofty  conception  of 
right  and  wrong  prevented  a  merging  of  ethics  in  eco- 
nomics, to  the  chagrin  apparently  of  many  writers. 

But  to  begin  with,  the  question  arose:  What  is  meant 
by  economics  when  we  explain  its  position  relative  to 
ethics?  Do  we  refer  to  the  science  in  the  abstract,  or 
to  applications  of  an  economic  nature,  or  to  special  eco- 
nomic inquiries,  or  to  a  description  of  economic  facts  as 
such?  Jevons  had  remarked  that  there  were  bound  to 
be  several  economic  disciplines,  such  as,  e,  g.,  "commer- 
cial statistics,  mathematical  theory  of  economics,  sys- 
tematic and  descriptive  economics,  economic  sociology, 
and  fiscal  science."  ^'*  Keynes  granted  the  possibility  of 
an  art  of  political  economy,  though  certain  that  it  would 
"be  largely  non-economic  in  character."  ^^  Menger, 
working  along  the  lines  marked  out  by  German  writers, 
from  Kameralism  upward  to  the  encyclopedic  compendia 
of  his  owTi  day,  recognized  the  four  sciences  of  historic 
development  and  statistics,  of  morphology,  theory  of  laws, 
and  politics.^^  These  four,  he  believed,  made  up  the 
whole  field  of  economics,  adding  that  "the  methods  of 
theoretical  political  economy  and  of  practical  sciences 
of  economics  cannot  be  the  same."  ^^  The  bearing  of  this 
on  ethics  was  obvious. 

Philippovich  in  his  "Outlines  of  Political  Economy," 
1887,  one  of  the  most  readable  and  popular  works  of 
Marginal  persuasion,  held  to  traditions  when  he  divided 
his   science  into   four  main   parts,  viz.   description,  His- 

»*  Preface  to  second  edition  of  his  Theory  of  Political  Economy. 
"  Scope  and  Metnod  of  Political  Economy,   p.  80. 
"  Conrad's   Jahrouecher,    Neue   Folge,    1889,   vol.   19. 
"  Untersuchungen,   1883,   p.   vi. 


262    THE  DEVELOPMENT  OF  ECONOMICS 

tory,  Theory,  and  Policy.^^  The  Theory  represented 
plain  economics  or  National  Economy ;  the  Policy  most 
of  applied  economics,  while  Public  Finance  was  grouped 
separately.  In  this  way,  including  possibly  a  World  or 
Social  Economics  descriptive  of  universal  principles,  his 
classification  was  meant  to  do  justice  to  all  phases  of 
the  subject. 

Now,  dependent  upon  which  of  these  divisions  was 
kept  in  mind,  ethics  might  be  said  to  be  part  of  eco- 
nomics, or  not.  Jevons,  to  be  sure,  was  not  bothered  much 
by  such  niceties  of  distinction.  He  simply  gave  a  variant 
on  Bentham  in  suggesting  that  while  economics  cannot 
dictate  moral  norms  to  society,  it  could  nevertheless 
recognize  qualities  of  pleasures  and  judgments,  confining 
itself  to  what  perhaps  should  be  called  the  lowest  in 
rank.  Paley  could  not  be  right  in  den3'ing  qualitative 
differences  between  feelings.  "A  single  liigher  pleasure 
will  sometimes  neutralize  a  vast  extent  and  continuance 
of  lower  pains."  ^^  But  economics  treats  of  "the  lowest 
rank  of  feelings.  .  .  .^^  Each  laborer,  in  the  absence  of 
other  motives,  is  supposed  to  devote  his  energy  to  the 
accumulation  of  wealth.  A  higher  calculus  of  moral 
right  and  wrong  would  be  needed  to  show  how  he  may 
best  employ  that  wealth  for  the  good  of  others  as  well 
as  himself."  ^^ 

Menger,  in  his  illuminating  though  not  very  thorougli 
treatment  of  the  whole  methodological  question,  shut  out 
ethics  from  economics  without  liesitancy.*'-  Moral  facts, 
he  admitted,  are  actually  imprisoned  in  economic  goods, 
but   since   they   defy  measurement   they   had  best  be   ig- 

"  Grundriss  dor  Polilischpn  okonoinio,  0.  edit.,  vol.  1,  p.  42.  Soe 
also  Sax,  E.  Weson  tind  Autfrnlnni  <lcr  Xatioualokouoaiik,  ch.  ti  ;  and 
Wagnor,   A.    Lphr-   und    Ilandbucli,    1.    edit.,   vol.   1. 

'"  Theory  of  Political  Kconoiay,  Introduction. 

'"  Ibidem. 

»■  Ibidem  ;  also  p.  2."?. 

"' Lntcrsuchungcu,  App.  9;  and  p.  G9. 


MARGINISM  263 

nored.  Practical  economics,  furthermore,  might  very 
well  make  use  of  economic  abstractions,  but  that  had 
nothing  to  do  with  problems  of  good  or  evil.^^  He  agreed 
in  this  respect  with  Walras  who  in  his  "Elements,"  edition 
of  1889,  repeated  an  earlier  view  that  science  studies 
truth,  art  what  is  useful,  and  ethics  what  is  equitable; 
and  this  being  so,  ethics  was  clearly  eliminated  from  eco- 
nomic inquiries.*'^  Similarly  Gide,  though  of  course  not 
a  Marginist,  wrote  in  his  "Political  Economy":  "To 
do  one's  duty,  to  exercise  one's  rights,  to  provide  for 
one's  wants,  are  three  fairly  distinct  ends  of  human  ac- 
tivity." ®^  And  again  Cossa :  "Ethics  is  absolutely  for- 
eign to  pure  economics,"  '^*"'  though  It  might  play  a  role 
in  applications. 

Sax,  the  author  of  "The  Nature  and  Ends  of  National 
Economy,"  1884,  declared  economics  to  be  simply  de- 
scriptive, while  applied  economics  was  necessarily  norm- 
ative,^^ a  view  voiced  also  by  Schumpeter  in  his  "Na- 
ture and  Principles  of  Theoretical  Economics,"  1908.^^ 
Pierson,  the  Dutch  Marginist,  wrote  in  his  "Principles 
of  Economics":  "Economics  may  be  described  as  the 
science  which  teaches  us  what  rules  mankind  should  ob- 
serve in  order  to  advance  in  material  prosperity."  ^^ 
The  science  was  held  to  have  a  preceptorial  value  even 
though  ethics  might  dissent  from  certain  applications. 
Dietzel,  whose  position  was  that  of  an  eclectic,  thougli 
with  a  preference  for  "exact  economics,"  separated  ethics 
and  economics,  but  granted  that  "economic  policy  must 

"  Page  58. 
«♦  Page  42. 

"  Edition  of  1913  by  D.  C.  Heath  &  Co.,  p.  2. 

"  Introduction  to  the  Study  of  Political  Economy,  transl.  by  Dyer,  L., 
189.3,  p.  70. 

•"  Wesen  und  Aufgaben  der  Nationalokonomik,  p.  21  ;  and  pp.  93-4. 
•'  Wesen  und  Ilauptinhalt  der  Theoretischen   Nationalokonomik,  p.  94. 
«»  Translation  of  Wotzel,  A.  A.,  1913,   vol.   1,  p.   1. 


264.    THE  DEVELOPMENT  OF  ECONOMICS 

be  understood  as  applied  ethics,  and  not  as  an  instance 
of  applying  theory."  ^° 

Among  English  and  American  Marginists  or  Utilita- 
rians making  use  of  Marginal  concepts  the  general  atti- 
tude was  hostile  to  moralism.  It  was  insisted  pretty 
generally  that  ethics  and  economics  are  two  different 
things,  not  only  as  regards  aims  or  premises,  but  fully 
as  much  as  regards  method.  The  prime  consideration 
was  the  need  of  exactness  in  science,  a  corollary  to  which 
was  the  exclusion  of  ethics  whose  norms  did  not  lend 
themselves  to  measurement  in  any  way.  As  Marshall 
put  it  in  his  "Principles  of  Economics":  "The  greater 
part  of  those  actions  which  are  due  to  a  feeling  of  duty 
and  love  of  one's  neighbor  cannot  be  classed,  tabulated, 
reduced  to  law  and  measured ;  and  it  is  for  this  reason, 
and  not  because  they  are  not  based  on  self-interest,  that 
the  machinery  of  economics  cannot  be  brought  to  bear 
on  them."  "^^  Other  social  sciences,  Marshall  wrote,  deal 
"almost  exclusively  with  the  quality  of  human  motive,"  ''^ 
but  economics  only  with  the  quantity ;  for  money  measures 
"human  motive  on  a  large  scale."  '^ 

Keynes  a  little  later  closed  the  question  with  the  words : 
''The  object  of  a  positive  science  is  the  investigation  of 
uniformities ;  of  a  normative  science  the  determination  of 
ideals ;  of  an  art  the  formulation  of  precepts."  '^'^  Hence 
economics  debarred  ethics;  or  "if  moral  judgments  are 
expressed  they  should  be  regarded  as  digressions."  '^^ 
So  also,  in  America,  Davenport  in  his  "Economics  of 
Enterprise,"  1913:  "The  economist  as  such  has  no  cri- 
teria by  which  to  test  the  worth  of  what  he  finds.     As 

'"  Thoorctisclio   Sozialukonomlk,   1805,   pp.   29-40. 

"  Pages  78   and   83. 

"  I'aKo  73. 

"  Paso  7((.     Sco  alsr)  p.  x. 

'•■  Scope  and   Metlio<l  of  Political   Economy,  pp.   35-6. 

"  Pago  53. 


MARGINISM  265 

economist  his  business  is  solely  with  the  facts,"  ^'^  though, 
on  the  other  hand,  "it  is  for  some  one  to  construct  an 
economic  science  adapted  not  only  to  the  requirements 
of  the  facts,  but  to  tlie  needs  of  their  amelioration."  '^'^ 
And  to  conclude  with  Ely  and  collaborators  in  "Outlines 
of  Economics":  Economics  "considers  ethical  and  po- 
litical phenomena  when  these  cannot  be  dissociated  from 
economic  phenomena,  but  insists,  nevertheless,  upon  the 
separation  of  economics  from  ethics,  politics,  and  soci- 
ology." ''■^ 

The  main  point  to  be  noticed,  then,  is  the  unwilling- 
ness of  Marginists  to  identify  social  science  with  a  the- 
ory of  ethics,  and  this  in  spite  of  their  sincere  desire 
to  make  economics  useful  for  the  population  at  large 
where  possible.  The  prevailing  sentiment  was  not  a  con- 
tempt for  high  moral  ideals,  but  the  fear  of  breaking  the 
chains  of  reasoning  that  made  economics  a  science.  It 
might  be,  as  Fetter  wrote,  that  "in  the  main  economics 
must  be  understood  as  a  social  duty  for  social  ends 
.  .  .  ,"  ^^  or  that,  in  the  words  of  Wicksteed,  "the  final 
goal  of  education  and  of  legislation  must  be  to  thwart 
corrupt  and  degrading  ends  ...  to  infect  the  mind  with 
a  wholesome  scheme  of  values,  and  to  direct  means  into 
cliannels  where  they  are  likeliest  to  conduce  to  worthy 
ends";^*^  but  this  was  far  different  from  assigning  to 
economics  a  definite  task  as  science. 

Field  of  Marginal  Economics. — Its  field  did  not  in- 
clude all  social  phenomena  as  perhaps  the  sociologist 
might  study  them.     Utilitarianism  had  as  early  as  1831, 

"  Pago  30. 

'•  Pages  528-29. 

"  Edit,  of  1909,  p.  675.  See  a'.so  Johnson,  A.  S.  Introduction  to 
Economics,  p.  20. 

""  Principles  of  Economics,  vol.  1,  p.  9. 

«<•  Scope  and  Method  of  Political  Economy  in  the  Eight  of  the  Modern 
Theory  of  Value  and  Distribution,  in  Kconomic  Journal,  vol.  24,  1914, 
p.  11.  See  also  Clay,  II.  Economics  for  the  General  Reader,  edit,  of 
191G,  p.  18. 


266    THE  DEVELOPMENT  OF  ECONOMICS 

in  the  person  of  Archbishop  Whately,  reduced  economics 
to  "Catallactics."  Aristotle's  term  "Chrematistics"  had 
also  been  revived;  and  "Plutology"  was  suggested  as  an 
improvement  on  both.  All  of  these  terms  had  circulated 
before  Marginism  came  into  its  own.  The  competitive 
principle  had  long  been  heralded  as  the  only  one  com- 
patible with  a  program  of  precise  monetary  measure- 
ments. What  went  into  the  science  of  economics  was  an 
exchange-mechanism  whose  laws  could  be  conveniently 
divorced  from  other  regularities  in  the  body  politic. 
The  whole  problem,  we  have  seen,  had  been  succinctly 
stated  and  uncompromisingly  settled.  Yet  Marginists 
were  glad  to  bring  new  data  to  bear  upon  it,  the  upshot 
being  a  still  more  emphatic  restriction  of  economics  to 
value  or  wealth  relations. 

With  this  end  in  view  Menger  declared  that  things 
become  "economic"  when  first  wanted  by  man ;  second, 
capable  of  gratifying  that  want  through  ascertainable 
causal  relations ;  third,  capable  of  being  understood  to 
satisfy  these  wants ;  and  fourth,  legally  acquirable  for 
gratification  of  wants,  directly  or  indirectly.®^  If  ad- 
mittedly this  took  care  of  only  one  phase  of  social  life, 
Menger  could  point  out  that  sciences  inevitably  deal  with 
selected  aspects.®^  And  besides,  the  individual  was  the 
natural  unit  of  society,  whence  one  inferred  the  possibil- 
ity of  explaining  fundamental  social  phenomena  by  in- 
dividual traits. ^^  The  organic  concept  was  not  popular 
with  most  Marginists,  nor  for  that  matter  was  always 
understood.  The  Utilitarian  legacy  was  an  obstacle  it- 
self, since  it  consisted  of  an  individualistic  psychology 
whose  lessons  J.  S.  Mill  had  so  superbly  expounded  in  his 

•'  Grundsatze  der  Volkswlrtschaftslehre,   p.   3. 
"Book  I,  ch.  6. 
"  Page  182. 


MARGINISM  267 

"Logic."  It  was  still  the  eighteenth  century  that  pos- 
sessed men's  minds  and  prevailed  upon  them  to  make  the 
associational  doctrine  the  hub  of  their  thinking!  Every- 
thing was  based  on  a  mechanistic  interpretation  of  con- 
sciousness, at  first  by  premeditation  and  in  perfect  good 
faith,  afterwards  not  rarely  in  forgetfulness,  or  with 
some  doubts  as  to  the  validity  of  the  premise.  Averages 
thus  figured  as  methodological  devices  for  "lumping" 
variables,  for  correlating  things  not  strictly  speaking 
comparable.  Or  long-time  reckonings  slipped  in  by  way 
of  elucidation,  that  is,  "representative  firms"  and  tenden- 
cies and  aggregates  of  valuation  such  as  Jevons  spoke  of. 
Theory  of  Law  in  Economics. — Both  the  idea  of  finding 
price  in  averages,  and  the  circumscription  of  economics 
as  a  science  of  exchange  ratios,  was  a  necessary  result 
of  an  individualistic  outlook.  Given  the  "Analysis  of 
the  Phenomena  of  the  Human  Mind,"  as  James  Mill  had 
perfected  it,  the  feasibility  of  a  "catallactics"  was  proven. 
It  needed  only  certain  legal  rights  to  fulfill  all  require- 
ments for  an  exact  science  of  values.  And  this  is  what 
Marginism  realized  more  clearly  than  any  of  the  older 
systems.  Physical  facts,  as  Keynes  pointed  out,  had 
then  no  part  in  the  survey.^^  What  counted  was  value, 
and  value  alone.  If  Philippovich,  therefore,  thought  the 
task  of  economics  was  the  study  of  "regular  recurrences 
of  economic  facts,  of  their  causes  and  eff^ects  not  only 
in  their  mutual  interaction,  but  in  their  bearing  upon 
non-economic  facts,"  ^^  he  was  heterodox  to  that  extent. 
For  like  Schumpeter  ^°  he  Avas  bound  to  agree  that  eco- 
nomics deals  indeed  only  with  price  in  one  or  more  as- 
pects. The  problem  was:  Given  individuals  A,  B,  C; 
given  their  value  functions  I,  II,  etc.,  for  n  goods ;  given 

"  Scopp  and  Method  of  Political  Economy,  pp.  82  and  96. 
'^  Grundriss  der  Politischen  okonomie,  9.  edit.,  vol.  1,  p.  41. 
"  Wesen  und  Hauptinhalt,  pp.  582-83. 


268     THE  DEVELOPMENT  OF  ECONOMICS 

their  ownership  of  such  goods  qal,  qa2,  etc.;  find  the 
exchange  relations  pi,  p2,  etc.,  at  which  exchange  takes 
place;  or  find  the  positive  or  negative  increments  dqal, 
dqaS,  etc.,  dqbl,  dqb2,  etc.,  which  would  be  added  to 
the  ownerships  mentioned.^^  Put  differently,  "in  its 
theoretical  aspects  the  science  of  economics  is  indeed  but 
little  more  than  a  study  of  price  and  of  its  causes  and 
its  corollaries.  .  .  ."  ^^  It  was  as  definite  theoretically 
as  sociology  was  at  times  supposed  to  be  vague! 

However,  this  abstraction  of  economic  data  from  the 
general  body  of  social  phenomena  brought  with  it  a  con- 
ception of  law  that  might  have  seemed  unsatisfactory 
even  to  J.  S.  Mill  who  fought  so  bravely  to  have  morals 
put  on  a  scientific  basis.  For  unlike  the  Utilitarian  no- 
tion the  Marginal  tended  strongly  toward  independence 
from  all  environmental  restraints.  Mill  derived  social 
laws  from  the  laws  of  consciousness  and  learning,  wliicli 
by  all  of  his  predecessors  had  been  directly  related  to  the 
outside  world,  and  which  to  Mill  himself  were  very  real. 
The  Utilitarian  economics  therefore  had  tried  to  keep 
in  touch  with  actual  facts  and  laws  of  price  or  distribu- 
.tion  became  objective  in  spite  of  philosophical  phenome- 
nalism. 

Something  like  this  view  appears  in  the  statement  of 
Schonberg,  in  his  "Manual,"  tliat  "all  laws  of  economics 
are  grounded  on  the  fact  tliat  what  is  external  in  its 
phenomena  occurs  according  to  natural  laws,  represent- 
ing true  operating  forces,  and  that  the  personal  psycliic 
forces,  in  spite  of  variations,  nonetheless  reflect  uni- 
formities not  only  in  essence  but  also  in  their  efTects."  ^^ 
As  long  as  Mill's  psychology  was  strictly  adhered  to  this 

"  I'atcos  2f;0-fil  ;  and  pp.  129-:!3.  Schuinpcter  takes  a  non-causal. 
Junction  ill  viow  of  pricing. 

■"'*  I>avcni)ort,  H.  J.  Kcononiics  of  Entorpriso,  1913,  p.  2(!.  Sco  also 
Wickstood,  IMi.  H.,  Comiiioii  Scnso  of  I'olitical  Ecoiioniy,  I'JlO.  pp.  IC!)  TD, 
and  th<>  xaino  writer's  article  in  the  Economic  Journal  for  1914,  vol.  24, 
p.  2. 

"  riandbuch,  edit,  of  1890,  vol.  1,  p.  20. 


MARGINISM  269 

interpretation  might  be  put  upon  the  classic  analysis 
of  exchange.  The  "economic  man"  was  real;  economic 
laws  were  real,  even  if  subject  to  rectification  in  a  par- 
ticular case.  There  was  nothing  to  controvert  the  old 
Sensationalistic  argument  in  its  psychological  aspects, 
unless  indeed  one  took  the  Kant-Hegelian  view  of  dialec- 
tics which  Pareto  ^^  for  instance  used  in  his  "Manual  of 
Political  Economy,"  1909,  when  delimiting  statics  as 
a  working  h3'pothesis  for  economics.  But  needless  to 
say,  the  problem  was  not  so  treated  by  either  Utilitari- 
anism or  Marglnlsm. 

Instead,  Marglnlsm  carried  the  subjectivlstic  Idea  of 
knowledge  over  into  the  realm  of  price  analysis — some- 
thing that  the  Utilitarians  had  not  quite  dared.  The 
tendency  before  long  was  very  distinctly  toward  a  con- 
ceptual dialectic.  In  fact  as  good  a  logician  as  W. 
Wundt,  whose  all-embracing  studies  entitle  him  to  spe- 
cial consideration,  declared  in  his  "Logic,"  1883,  that 
the  task  of  economics  Is  not  "the  establishment  of  laws 
obtaining  in  a  real  economy  outside,  but  rather  the  exact 
definition  of  economic  concepts  and  of  their  reciprocal 
relations.  .  .  ."  ^^  In  other  words,  economic  laws  were 
of  a  somewhat  mathematical  nature,  constructed  upon 
idealities,  and  not  directly  verifiable  by  anything  oc- 
curring in  the  phenomenal  world. 

Menger  In  his  "Inquiry  into  the  Method  of  Social  Sci- 
ence" of  the  same  year  entertained  similar  notions,  and 
for  this  reason  no  doubt  opened  his  survey  with  a  dis- 
tinction between  three  kinds  of  studies,  viz.,  the  historic- 
statistical,  the  theoretical,  and  the  practical.  The  Im- 
mediate occasion  for  this  assertion  was  of  course  his 
desire  to  expose  the  weaknesses  of  the  Historical  position. 
He  felt  that  HIstorIsm  struck  at  the  root  of  social  science 

»» Pages  45  and  107. 

"  Logik,  2.  edit,  vol.  2,  Part  II,  p.  518. 


270     THE  DEVELOPMENT  OF  ECONOMICS 

as  exact  science,  and  had  to  be  proven  wrong  and  vi- 
cious. Thus  his  "Inquiry"  came  to  have  a  very  definite 
influence  not  only  upon  economists,  but  especially  also 
upon  German  methodologists. 

In  general,  what  gains  were  made  consisted  chiefly  of 
a  better  understanding  of  the  difference  between  static 
and  historical  viewpoints,  of  neatness  in  mathematical 
presentation,  and  of  tolerance  for  induction  as  an  aux- 
iliary. Jevons  in  his  "Principles  of  Science,"  1874,  said 
nothing  of  economic  methods.  Menger  shows  the  influ- 
ence of  Ruemelin  ^^  and  of  current  German  logic,^^ 
though  partly  by  way  of  opposition.  Sax  and  Philip- 
povich  did  not  at  any  time  go  beyond  generalities.  In 
England  Marshall  and  Keynes  were  conscious  of  a  seri- 
ous methodological  problem,  but  did  not  step  out  of  the 
path  made  by  Mill.  All  in  all,  the  economic  literature 
exhibits  few  signs  of  acquaintance  with  the  leading 
logical  works  of  the  day.  It  was  held,  probably,  that 
the  fundamentals  were  sufficiently  known,  or  that  only 
such  phases  required  special  consideration  as  aided  in 
the  delimitation  of  economic  research.  Psychology  for 
this  reason  was  drawn  upon  more  heavily  than  logic, 
and  the  familiar  dispute  about  in-  versus  de-duction  took 
second  rank  to  the  case  of  statistics  or  history  versus 
statistic  deduction. 

Thus  Menger,  in  beginning  with  his  threefold  classi- 
fication, prepared  readers  for  his  distinction  between  in- 
dividual and  recurrent  events.  Economics,  he  showed, 
dealt  with  the  latter  class ;  history  with  the  former. 
Science  could  not  be  without  regularities  of  sequence  or 
of  coexistence.®*     Laws  referred  to  types  of  things  and 

"Ruemelin,  G.  Ton  (Chancellor  of  Univ.  of  Tuehingen),  Reden  und 
Aufsactze  covering  the  periofi  of  1875-94,  in  three  volumes.  Difference 
between  deductive  and  statistical   method   is  specifically  hrought  out. 

»' Wundt's  Logik  appeared  ISSO-S.'i. 

'*  I'ntersuchunpen,  ch.  2.  Compare  this  with  Paul,  H.  Prinzipien  der 
Sprachgeschichte,  1880,  ch.  1. 


MARGINISM  271 

relations,  and  these  certainly  contrasted  with  things  them- 
selves, or  with  the  kind  of  reality  that  historians  in- 
vestigated. For  the  past  could,  as  such,  give  nothing 
but  actual  occurrences,  each  of  which  differed  in  some 
point  from  any  other.  Historians  wanted  nothing  else. 
How  could  they  hope  to  do  more  than  tell  how  things 
actually  happened,  as  Ranke  had  maintained?  To  phi- 
losophize on  chains  of  incomparable  events  was  a  service 
useful  to  none.  On  the  other  hand,  to  pretend  erecting 
a  structure  of  laws  (say  of  progress  or  of  exchange  and 
distribution)  upon  historical  data,  each  group  qualita- 
tively distinct  from  the  other,  was  to  misunderstand  en- 
tirely the  essence  of  law  natural  or  law  social. 

Monger,  setting  a  precedent  for  later  writers,  there- 
fore passed  over  to  a  statement  on  the  nature  of  eco- 
nomic inquiry,  and  in  doing  so  contrasted  not  merely 
relations  of  things  with  the  latter  themselves,  but  also 
the  two  with  our  concept  of  them.  What  Wundt  ^"^  said 
proved  to  be  nearly  correct :  Economics  was,  in  a  sense, 
a  conceptual  science  on  the  order  of  mathematics.  No 
one  had  seen  the  magnitudes  or  relations  discussed,  meas- 
ured, and  interlaced  in  man's  mind,  but  that  did  not 
prevent  us  from  obtaining  inner  consistency  in  our  sys- 
tem, or  from  testing  it  out  under  forfeiture  of  the  ab- 
stractions themselves.  As  Menger  acknowledged:  "The 
essence  of  exact  science  in  the  field  of  ethical  [i.  e.  social] 
phenomena  consists  in  that  we  reduce  social  phenomena 
to  their  simplest  elements,  measure  them  by  a  standard 
suitable  to  their  nature,  and  try  to  find  the  laws  accord- 
ing to  which  these  elements,  pictured  as  in  isolation, 
give  rise  to  more  complex  social  events."  ^^  The  con- 
stituents were  to  be  determined  beforehand  partly  as  gen- 

"  Logik,  2.  edit.,  vol.  2,  Part  II,  p.  500. 

»« L'ntersuchungen,  p.  43.     See  also  pp.  77-8,  and  Book  I,  chs.  5  and  7, 
passim. 


272     THE  DEVELOPMENT  OF  ECONOMICS 

eral  premises,  partly  as  definitions  resting  on  them. 
What  did  not  occur  in  isolation  was  to  be  imagined  to 
occur  so  that,  by  means  of  this  artifice,  certain  cal- 
culations might  be  attempted.  Allowances  could  then 
be  made  afterwards,  the  supposition  being  that  all  inter- 
ference was  exceptional  or,  if  regular,  of  minor  effect 
upon  the  general  course  of  things.  Wundt  said  that 
economics  comprised  a  system  of  relations  lifted  out  of 
a  larger  actual  whole,  i.  e.  happenings  in  the  outside 
world,  arranged  conceptually  "in  progressive  logical  de- 
pendence from  the  least  to  the  most  special."  ^^  That  is 
what  Marginism  accomplished  in  detaching  "exact  law" 
from  the  unstable  correlations  before  our  eyes.  That 
was  the  reason  for  Menger's  remark:  Whether  the  indi- 
vidual factors  actually  exist  In  isolation  or  are  really 
measurable  exactly  is  of  no  importance  In  social  science 
any  more  than  it  would  be  for  natural  science. ^^  In 
other  words,  though  natural  science  could  measure  par- 
ticulars actually  occurring  and  social  science  could  not, 
this  difference  had  no  bearing  on  the  main  argument.  It 
still  remained  for  the  economist  to  abstract  as  he  listed, 
so  as  to  be  able  to  develop  a  self-consistent  system  of 
thought.  Even  deductions  from  premises  known  to  dis- 
agree with  particulars  had  their  value  from  tills  stand- 
point. The  empiric  laws  of  Utilitarianism  which  roughly 
marked  tendencies  measurable  and  true  to  human  nature 
or  history  were  less  consequential  than  a  precise  formu- 
lation of  theorems  not  concretely  verifiable. 

For  the  rest,  laws  were  approximations  only.  The  re- 
sults of  social  science  differed  from  those  of  natural  sci- 
ence only  in  degree.     A  tendency  was  aU  anybody  could 

"Logik,   2.   odit.,  vol.   2.  Tart  II,   p.   500. 
•*  Untersuchungen,  pp.  45-6. 


MARGINISM  273 

discover,  the  real  causal  relation  being  too  complex  for 
our  means  of  analysis. ^^ 

Statics  of  Marginism. — It  followed  from  this  guiding 
principle  that  economics  took  a  static  view  of  the  world. 
There  was  no  possibility  of  reckoning  with  all  the  inter- 
actions as  they  took  place  in  history,  since  that  would 
involve  change  everlasting  and  a  loss  of  the  very  regu- 
larities science  sought  to  discover.  Processes  should  be 
conceived  as  an  interplay  of  forces  at  rest.  If  the 
equilibrium  was  disturbed  it  was  not  for  long,  or  else  the 
process  ceased  to  be  a  subject  for  economists.  What 
counted  was  an  average  of  the  arithmetical  sort,  the 
number  of  items  being  known  by  assumption,  and  the 
lesser  magnitudes  being  purposely  left  out  of  the  com- 
putation. This  was  the  idea  taken  over  from  physics 
during  the  eighteenth  century — a  reasoning  from  anal- 
ogy apparently  justified  by  the  facts.  For  that  hu- 
man nature  was  one  with  the  physical  environment  and 
that  the  laws  governing  the  latter  also  applied  to  the 
former  seemed  self-evident  ever  since  the  Stoics  had 
philosophized  and  the  Cartesians,  of  several  varieties, 
had  given  British  empiricism  its  impetus.  The  mind  was 
pictured  as  a  sort  of  parallelogram  of  forces.  Matter 
and  motion  were  facts  attributed  to  consciousness  no  less 
than  to  substance.  The  whole  theory  of  the  passions 
gained  plausibility  from  this  postulate  which  could  be 
used  to  satisfy  the  idealist  no  less  than  the  materialist 
(in  the  metaphysical  sense). 

Bentham  had  called  his  table  of  the  springs  of  human 
action  a  "psychological  dynamics.'*  Comte  had  popu- 
larized tlie  Newtonian  description  of  the  Avorld  In  his 
"Positive   Philosophy"    where    "social   physics"   was    the 

"  Ibidem,  pp.  30-7.  See  also  Schuinpeter,  J.  Wesen  und  Ilauptinhalt, 
pp.  191-1*2,   and  Keynes,  J.     Scope  and  Method,  p.  213. 


274     THE  DEVELOPMENT  OF  ECONOMICS 

subject-matter  for  discussion.  True,  unlike  the  Utili- 
tarians and  especially  J.  S.  Mill,  Comte  saw  no  way  of 
separating  economics  from  the  larger  whole;  nor  was  he, 
as  it  happened,  a  believer  in  a  science  of  psychology. 
To  him  physiology  was  real,  but  consciousness  only  a 
convenient  term  for  individualizing  social  facts.  Yet  it 
was  he  above  all  who  encouraged  economists  to  abstract 
statics  from  dynamics,  i.e.,  from  actualities,  so  that  long- 
run  tendencies  might  be  isolated.  According  to  our 
French  philosopher  "social  dynamics  studies  the  laws  of 
succession,  while  social  statics  inquires  into  those  of  co- 
existence; so  that  the  use  of  the  first  is  to  furnish  the  true 
theory  of  progress  to  political  practice,  while  the  sec- 
ond performs  the  same  service  in  regard  to  order."  ^^^ 
His  well-known  differentiation  between  order  and  progress 
was  grounded  in  a  recognition  of  the  law  of  change. 

History  had  been  studied  too  often  by  men  of  great 
speculative  power  not  to  be  included  in  an  estimate  of 
human  values.  The  physical  or  mathematical  concept 
of  equilibrium  proved  extremely  useful  in  a  contrasting 
of  past  and  present,  of  things  as  they  are  with  things 
as  they  had  been  at  successive  historical  epochs.  It  was 
clear  to  Comte  that  human  nature  must  be  viewed  in  both 
lights  if  the  whole  truth  should  become  known,  and  on 
this  account  he  suggested  a  method  of  investigation  aux- 
iliary to  the  accepted  induction  of  Francis  Bacon  and  his 
successors.  Events  were  not  absolutely  alike  for  any 
length  of  time,  but  they  could  be  considered  so  for  an 
instant  of  time.  Social  laws  were  observable  as  truly  in 
the  facts  before  us,  as  in  the  stages  through  which  they 
passed  weaving  the  cloth  of  history. 

Jennings  in  his  "Natural  Elements  of  Political  Econ- 

"">  Positive  rhilosoph3',  abridgment  and  translation  of  Miss  Martlneau, 
1^55,  p.  404.  Compare  this  witli  Spencer,  II.,  Discussions  in  Science, 
I'hilosophy,  and  Morals,  edit,  of  1800,  p.  133, 


MARGINISM  276 

omy'*  ^°^  had  adopted  Comte's  notion.  J.  S.  Mill  even 
earlier  had  contrasted  a  "theory  of  motion"  [dynamics] 
with  a  "theory  of  equilibrium"  [statics],  this  latter  being 
a  "collective  view  of  the  economical  phenomena  of  soci- 
ety considered  as  existing  simultaneously."  ^^^  Some- 
how the  thought  of  succession  was  coupled  with  dynamics, 
and  that  of  coexistence  with  statics.  Pareto  in  his 
"Manual"  wrote:  The  economic  equilibrium  is  that  "state 
which  would  be  prolonged  indefinitely  in  the  absence  of 
changes  for  conditions  surrounding  it."  ^"^  The  habit, 
for  instance,  of  consuming  a  half  pound  of  bread  daily 
would  persist  if  no  forces  were  brought  to  bear  upon  the 
consumer  from  outside.  The  average  event  should  en- 
gage the  economist,  not  the  tracing  of  all  possible  in- 
cursions as  a  long-time  view  might  reveal  them.  Thus 
Keynes  judged  that  dynamics  deals  with  the  "manner 
in  which  conditions  vary  over  long  periods  of  time,  to- 
gether with  the  economic  changes  that  ensue  there- 
upon." ^"■^  More,  "the  dynamics  of  political  economy  is 
exceptional  in  its  almost  entire  dependence  upon  an  his- 
torical method  of  treatment,"  ^^^  while  in  general  the 
economist  followed  the  deductive  principle  in  his  inquiries. 
His  laws  would  be  the  same  since  interferences  with  the 
assumed  forces  amounted  to  little  in  the  aggregate ;  only 
the  viewpoint  was  different.  In  the  words  of  a  later 
writer:  "There  is  nothing  new  but  the  situation";  ^°^ 
the  principle  was  the  same  whether  exceptions  were  taken 
historically  or  not. 

This,  to  be  sure,  was  not  the  opinion  of  every  student 
of  Marginism,     Increasingly   during   the   twentieth   cen- 

"'  Preface,  p.  30. 
"»  Logic,  Book  IV,  ch.  1. 
><»  Ch.  3,  §  22. 

'"•  Scope  and  Method,  p.  141. 
"» Ibidem. 

loo  Davenport,  II.  J.     Economics  of  Enterprise,  p.  425.     See  also  Clark, 
J.  B.,  Distribution  of  Wealth,  1899,  chs.  15  and  16. 


276     THE  DEVELOPMENT  OF  ECONOMICS 

tury  critics  made  bold  to  challenge  the  important  con- 
tention that  dynamics  was  to  statics  what  the  exception 
was  to  the  rule,  as  if  the  first  might  be  with  justice 
neglected  in  the  study  of  economic  processes. ^^'^ 
Schumpeter,  e.  g.,  declared :  "The  dynamics  of  economics 
is  in  every  respect  something  radically  different  from  its 
statics,  both  as  to  method  and  as  to  contents."  ^"^  The 
two  should  be  complements,  but  they  could  not  be  rent 
asunder  as  if  one  could  do  the  work  of  both.  Even 
though  equilibrium  were  that  "state  in  which,  as  long  as 
no  disturbing  factor  from  outside  appears,  no  leaning 
toward  change  exists,"  ^^^  yet,  since  the  interferences 
were  continuous,  a  complete  analysis  of  events  involved 
disequilibrium  as  well.  Hence,  "in  so  far  as  statics  is 
merely  a  logic  of  economy,  it  has  universal  validity,  but 
when  it  professes  to  give  a  psychology  of  the  process  it 
must  prove  sadly  remiss."  ^^^ 

Up  to  the  turn  of  the  century,  however,  Marginism 
was  regularly  committed  to  static  interpretations.  The 
only  concession  made  was  the  enumeration  of  certain 
factors  back  of  dynamics,  these  factors  to  receive  at- 
tention after  the  system  had  been  completed,  but  not  be- 
fore. J.  S.  Mill  himself  had,  as  master  of  logic,  pleaded 
for  this  rule,  and  relegated  his  "Influence  of  the  Progress 
of  Society  on  Production  and  Distribution"  to  the  end 
of  his  "Principles."  J.  B.  Clark  in  his  "Distribution 
of  Wealth,"  1899,  cited  among  the  dynamic  facts:  Popu- 
lation, methods  of  production,  organization,  capital  and 
wants  ;^^^  Davenport,  in  his  "Economics  of  Enterprise": 

'""  See,  e.  g.,  Patten's  comment  on  Pantalooni's  dynamic  view  in  Papers 
and  Proceedings  of  the  American  Economic  Association,  Series  3,  I'JIO, 
vol.  11,  pp.  128-29. 

108  w'esen   und   llauptinhalt,  p.  xix. 

]o«  Pages  36  and  109. 

""Theorie  der  Wirtscliaftlichen  Entwicklung.  p.  612.  note,  and  pp. 
473-88.     See  also  Anderson,  B.  M.     Value  of  Monej-,  p.  559. 

>"  Ch.  25. 


MARGINISM  277 

Changes  in  humanity  such  as  of  numbers,  wants,  and 
capacities,  and  changes  in  environment  such  as  in  land, 
capital  goods,  and  in  loan  fund;^^"  and  Fetter  in  his 
"Economic  Principles,"  1915:  Population,  culture,  nat- 
ural resources,  and  technique  of  production  in  the  widest 
sense. -^^^  To  this  extent  then  Historism  had  made  its 
point  in  demanding  a  broader,  less  arbitrary,  less  cock- 
sure treatment  of  social  facts  than  Utilitarianism  had 
granted.  A  common  sense  view  was  allowed  after  science 
had  done  with  its  self-imposed  task.  Statics  conde- 
scended to  recognize  Dynamics,  just  as  Competition 
treated  Monopoly  leniently,  not  to  abdicate  superior 
rights  but  to  prove  its  own  merits. 

The  Method  of  Marginism.— The  question  of  method 
in  the  stricter  sense  was  answered  in  harmony  with  the 
above  views.  It  was  agreed  for  the  most  part  that  his- 
tory and  statistics  could  play  only  a  secondary  role  in 
the  establishment  of  laws.  The  principal  means  was  de- 
duction from  premises  laid  down,  the  premises  resulting 
from  induction  of  the  sort  British  empiricists  had  first 
called  "experimental."  All  the  Utilitarians  had  insisted 
that  their  postulates  were  tlie  conclusions,  inductively 
arrived  at,  of  a  science  basic  to  economics,  psychology 
being  that  science.  Mill  in  his  "Logic"  had  called  at- 
tention to  this  fact  and  in  addition  urged  the  possibility 
as  well  as  the  advisability  of  checking  up  economic  de- 
ductions by  the  actual  facts  of  a  special  case. 

The  Marginists  agreed  to  these  views,  but  when  chal- 
lenged by  critics  like  Ruemelin  for  excessive  abstraction 
added  that  reasoning  from  chosen  premises  did  yield 
"constant  elements  [Grundformen]  indicative  of  mass  ef- 

"=  Pages  453-54. 

"^  Vol.  1,  pp.  400-01.  See  also  Pantaleoni,  M.,  article  in  American 
Economic  Association  publications,  Series  3,  vol.  11,   1910,  pp.  113-16. 


^78    THE  DEVELOPMENT  OF  ECONOMICS 

fects  in  the  interaction  of  psychic  forces."  ^^^  Jevons 
made  of  economics  a  "mechanics  of  utiHty  and  self-in- 
terest" in  the  beHef  that  "the  first  principles  of  political 
economy  are  so  widely  true  and  applicable  that  they 
may  be  considered  universally  true  as  regards  human 
nature."  -^^^  Or  to  quote  from  another  page:  "That 
every  person  will  choose  the  greater  apparent  good; 
that  human  wants  are  more  or  less  quickly  satiated ; 
that  prolonged  labor  becomes  more  and  more  painful, 
are  a  few  of  the  simple  inductions  on  which  we  can 
ground  ...  a  complete  mathematical  theory."  ^^®  To 
be  sure,  "the  deductive  science  of  economics  must  be  veri- 
fied and  rendered  useful  by  the  purely  empirical  science 
of  statistics."  ^^^  Induction  was  an  essential  in  spite 
of  its  derivation  from  deduction.  However,  in  the  first 
place,  "induction  .  .  .  can  only  be  performed  by  the  use 
of  deduction,"  ^^^  and  in  the  second  place  "induction  is 
simply  an  inverse  employment  of  deduction,"  Jevons  had 
been  greatly  stimulated  by  the  logic  of  G.  Boole,  and 
developed  further  the  idea  of  substitution  and  quantifica- 
tion by  which  many  logicians  have  hoped  to  free  their 
work  from  medieval  fetters.  But  so  far  as  economics 
was  concerned  this  treatment  of  the  syllogism  as  the 
key  to  all  reasoning  gave  additional  prestige  to  the  ab- 
stract deductive  method.  Economics  on  this  plan  was 
almost  certain  to  become  a  conceptual  science,  however 
strong  Jevons'  conviction  that  all  scientific  conclusions 
are  but  probabilities  resting  ultimately  on  the  use  of 
calculus,  and  therefore  truths  whose  verification  is  either 
empirical  in  the  ordinary  sense,  or  else  irrelevant.  What 
Jevons  expected  from  an  averaging  of  valuations  in  the 

"*  Ruemelin,  G.  von,  Reden  und  Aufsatze,  vol.  1,  1875. 
"'The   Future  of  Political   Economy,   1876. 
"'Theory  of  Political  Economy,  first  edition,  p.  24. 
"'  Ibidem,  Introduction. 
"» Ibidem. 


MARGINISM  279 

marginal  analysis  of  price  is  to  be  understood  precisely 
in  the  light  of  his  earlier  work  on  logic. ^^^ 

Menger's  study  of  method  agrees  fairly  well  with  that  of 
the  English  writer,  though  aiming  partly  at  different 
things.  In  both  cases  we  meet  with  appreciative  refer- 
ences to  the  psychological  aspects  of  the  question,  but 
Menger,  mastering  a  much  smaller  range  of  facts,  dwells 
especially  on  the  impracticability  of  Historical  ideals 
which  resorted  so  frankly  to  the  principle  of  enumera- 
tion. Menger  at  once  asks  us :  Would  it  be  possible  to 
prove  a  single  theorem  of  Euclid  by  referring  to  ex- 
periential lines  and  planes  ?  And  the  reply  of  course  is : 
No !  Neither  then  could  Historism  obtain  exact  knowl- 
edge by  delving  into  the  distant  past.^^^  There  was  no 
such  thing  as  precise  measurement ;  for  any  correlation 
of  economic  events,  no  matter  how  simple,  comprised 
far  more  elements  than  man  could  either  detect  or  ap- 
praise for  his  purposes.  The  empirical  method,  there- 
fore, deserved  no  serious  consideration.  As  Wieser  later 
remarked  in  his  "Natural  Value" :  The  laws  of  value 
"are  to  economics  what  the  law  of  gravity  is  to  Mechan- 
ics"; ^^^  both  springing  from  hypotheses  which  were  be- 
yond explanation.  We  deduce,  but  only  here  and  there 
have  material  for  substantiation  of  claims. 

That  is,  observation  and  experimentation  had  no  place 
in  economics,  first  because  the  subject-matter  was  un- 
suitable, and  secondly  because  psychology  had  already 
furnished  the  data  to  build  with.  Pricing  could  proceed 
on  deduction,  since  feelings  or  anticipations  of  pleasure 
and  pain  engendered  the  same  reactions  in  all  men  for  all 
times.  Regular  recurrences  expressed  in  pecuniary  ra- 
tios thus  were  certain ;  one  could  proceed  from  general 

"»  See  Jevons'  Principles  of  Science,  notably  cbs.  4,  0,  7,  11,  23  and  31. 
""  See  for  instance  Menger's  Untersuchungen,  Book  I,  ch.  4. 
"^  Preface. 


280    THE  DEVELOPMENT  OF  ECONOMICS 

to  particular,  and  the  monetary  standard  would  measure 
exactly  the  preferences  exchanged.  This  was  the  at- 
titude of  Marshall  ^^^  and  of  Keynes,^^^  of  Pierson  ^^* 
and  Philippovich  ^-^  and  other  exponents  of  Marginism. 
Keynes,  of  course,  saw  the  value  of  variety  in  research. 
He  thought:  "According  to  the  special  department  or 
aspect  of  the  science  under  investigation  the  appropriate 
method  may  be  either  abstract  or  realistic,  deductive  or 
inductive,  mathematical  or  statistical,  hypothetical  or  his- 
torical." ^^  But  this  was  merely  a  defence  for  com- 
bining methods  that  differed  in  their  appraisal  of  facts 
more  than  in  principles  of  reasoning.  These  latter 
were  not  seriously  examined  by  any  of  the  Marginists 
or  by  men  dealing  with  Marginism.  It  was  natural  for 
Keynes  to  mention  four  fundamentals  in  economics,  and 
then  to  defend  deduction  as  the  method.  Thus  he  writes: 
Maximum  satisfaction  "with  the  smallest  possible  sacri- 
fice, the  law  of  decreasing  final  utility  as  the  amount  of 
commodity  increases,  the  law  of  diminishing  return  from 
land,  and  the  like,  are  premises  which  possess  the  requi- 
site degree  of  universality"  for  deductive  reasoning.^"'^ 
Bagehot's  essay  on  postulates  in  economics  was  agreeable 
to  Keynes,  though  he  confessed,  by  way  of  qualification, 
that  "the  validity  of  economic  postulates  varies  not  only 
from  time  to  time,  and  place  to  place,  but  also  in  differ- 
ent connections  at  the  same  time  and  place.'*  ^-^  Any 
Marglnist,  however,  might  have  granted  this  without 
abandoning   the    deductive   method,    for   his    system   was 

^"  Principles  of  Economics,  pp.  74-77. 

"'  Scope  and  Method  of  Political  Economy,  ch.  6. 

"♦  Pierson,  N.  G.  Principles  of  Economics,  transl.  by  Wotzel,  A.  A., 
vol.  1,  Introduction.  „       ,.^         ,    ,  .o  ac,      a 

'"  Grundriss  der  Politischen  okonomie,  9.  edit.,  vol.  1,  pp.  46-49.  See 
also  Dietzel,   II.     Theoretische   Sozialokonomlk,   pp.  94-96. 

"*  Scope  and  Method  of  Political  Economy,  p.  30. 

"'  Page  227. 

'"  Page  228. 


MARGINISM  281 

avowedly  built,  not  on  conditions  for  all  times,  but  on 
such  as  prevailed  for  the  moment. 

The  methodological  question  was  not  whether  certain 
assumptions  were  perennially  valid,  but  whether  per  time 
and  place  they  answered  a  need,  being  sufficiently  true 
to  facts  under  investigation  to  warrant  our  using  them, 
so  that  the  conclusions  could  be  proclaimed  as  laws  re- 
gardless of  minor  fluctuations.  And  this  Marginism  de- 
sired to  demonstrate.  Deduction  became  both  worth  while 
and  necessary  because  of  the  laws  of  valuation.  No  other 
approach  compared  favorably  with  this  one,  not  even 
the  statistical,  and  that  chiefly  "because  of  the  plurality 
of  causes  and  the  intermixture  of  eff'ects"  ^-^  whose  sig- 
nificance J.  S.  Mill  had  been  the  first  to  stress.  Pierson 
agreed  with  Keynes,  since  "reasoning  or — to  use  a  tech- 
nical expression — deduction  is  the  only  method  by  which 
successful  results  can  be  obtained  in  the  tracing  of  eco- 
nomic laws."  ^^^  Philippovich,  like  the  rest,  separated 
in-  and  de-duction  mainly  in  order  to  advocate  the  latter, 
and  American  Marginists  usually  followed  in  practice,  if 
not  in  theory. 

Note  on  Mathematical.  Economics 

It  was  natural  enough  that  mathematics  should  play 
a  part  in  economics  as  soon  as  it  was  realized  that  quanti- 
ties of  an  economic  sort  existed  and  were  functionally 
related.  The  change  from  Physiocratism  to  Smith's  em- 
phasis on  price  and  income  was  itself  a  bid  for  exact 
measurements  and  their  graphic  presentation,  and  when 
under  Utilitarianism  and  Marginism  this  distributive  fea- 
ture became  the  central  topic,  the  mathematical  princi- 

i2»  Page  198. 

""  Grundriss,  9th  edit.,  vol.  1,  p.  33. 


282     THE  DEVELOPMENT  OF  ECONOMICS 

pie  of  coordination  could  scarcely  have  been  long  over- 
looked. However,  it  was  not  Marginism  that  introduced 
this  thought,  nor  was  there  anything  in  the  mathematical 
method  to  require  a  theory  of  margins.  The  first  requi- 
site rather  was  a  suitable  set  of  symbols,  an  annotation 
capable  of  expressing  precise  relations  of  magnitude,  and 
in  the  second  place  perhaps  some  such  visualization  as 
Descartes  made  possible  by  his  invention  of  analytic 
geometry  (1637).  To  use  lines  and  figures  instead  of 
letters  in  an  equation  might  prove  advantageous,  once 
the  concept  of  variables  in  correlation  was  understood. 
The  calculus  of  variation  has  been  defined  as  "a  method 
of  finding  curves  having  a  particular  property  in  the 
highest  or  lowest  degree."  It  needed  no  long  argument 
to  show  the  applicability  of  such  measurements  to  mone- 
tary values. 

Cournot  in  his  "Researches  into  the  Mathematical 
Principles  of  the  Theory  of  Wealth,"  1838,  did  not  try 
to  defend  his  innovation,  but  simply  pointed  to  the  fact 
of  value  as  a  ratio,  to  equations  of  exchange,  and  to  sym- 
pathetic movements  of  price  as  the  best  possible  material 
for  a  mathematical  method.  Annual  demand,  he  said,  is 
"for  each  article  a  particular  function  of  the  price  of 
such  article."  ^  And  "just  as  it  is  possible  to  make  an 
indefinite  number  of  hypotheses  as  to  the  absolute  motion 
which  causes  the  observed  relative  motion  in  a  system  of 
points,  so  it  is  also  possible  to  multiply  indefinitely 
hypotheses  as  to  the  absolute  variations  which  cause  the 
relative  variations  observed  in  the  values  of  a  system 
of  commodities."  -  Whewell  treated  some  of  Ricardo's 
theorems  mathematicalh'  in  1829.  Carey  on  different  oc- 
casions approved  of  the  idea,  and  in  his  "Unity  of  Law," 

'  Translation  of  Bacon,  N.  T..   1897,  ch.  5,   §   21. 
»Cb.2. 


MARGINISM  283 

1872,  wrote:  "Mathematics  must  there  [In  social  sci- 
ence] be  used,  and  the  more  It  Is  used  the  more  must 
sociology  take  the  form  of  a  real  science,  .  .  ."  ^  Mac- 
Leod in  his  "Principles  of  Economic  Philosophy'*  had 
said:  "The  pure  science  of  economics  Is  capable  of  rig- 
orous mathematical  demonstration.'*  ^ 

On  the  one  hand,  then,  the  use  of  mathematics  ante- 
dates Marginism,  while  on  the  other  It  was  by  no 
means  common  among  the  Marginists.  The  bulk  of 
treatises  and  periodic  literature  either  waived  the  ques- 
tion, or  employed  annotation  and  graphics  sparingly.  If 
Jevons  and  Gosscn  and  Walras  set  a  precedent  for  their 
own  school,  so  did  Coumot,  Colson,  Pareto,  and  Pan- 
taleoni  for  economists  of  a  different  persuasion.  The  real 
question  was  not  whether  economic  magnitudes,  correla- 
tions, and  other  principles  might  not  be  adapted  to  such 
treatments  as  mathematics  stood  for  preeminently,  but 
what  precisely  was  the  nature  of  a  mathematical  method, 
what  its  bearing  upon  the  methodology  of  social  science. 
And  on  this  Important  matter  opinions  were  divided.  At 
different  times  economists  meant  by  the  mathematical 
method  either  deduction  as  such,  or  any  use  of  algebraic 
symt)ols  or  of  graphs,  or  coordinations  of  two  or  more 
variables  of  a  simple  kind,  or  jnerely  an  exact  measure- 
ment of  magTiitudes. 

Men  like  Bernouilli  and  Hume,  for  instance,  called 
social  science  mathematical  because  it  proceeded  deduc- 
tively, while  natural  science  according  to  Bacon  rested 
on  Induction.  Even  J.  S.  Mill  used  the  word  mathe- 
matical occasionally  in  this  sense.  Jevons  took  more 
nearly  the  last  Interpretation  given,  In  that  he  divided 

'  Page  65,  See  also  Manual  of  Social  Science,  a  condensation  of  same 
writer's  philosophy  by  Kate  McKean,   1SG6,   p.  31. 

♦Second  edit.,  vol.  1,  p.  124.  For  view  of  Walras  (L.)  see  his  Ele- 
ments d'Econoniie  Politique  I'ure,  edit,  of  1889,  p.  vii. 


284     THE  DEVELOPMENT  OF  ECONOMICS 

all  sciences  into  the  logical  and  mathematical.  He  wrote 
in  his  "Theory  of  Political  Economy":  "There  can  be 
but  two  classes  of  sciences — those  which  are  simply  log- 
ical and  those  which,  besides  being  logical,  are  also  mathe- 
matical." ^  Economics,  it  need  hardly  be  mentioned,  was 
of  the  latter  variety,  but  it  was  at  the  same  time  ad- 
mitted that  "equations  expressing  the  laws  of  supply 
and  demand  .  .  .  have  a  complexity  entirely  surpassing 
our  powers  of  mathematical  treatment."  ^  His  "Prin- 
ciples of  Science,"  brings  out  very  clearly  the  limits  of 
the  mathematical  method  in  economics ;  certainly  much 
more  so  than  his  "Theory."  In  fact,  we  are  reminded 
of  our  ability  to  reason  mathematically  •without  taking 
recourse  in  symbols,''^  even  without  believing  in  a  precise 
correlation  of  an  indeterminate  number  of  variables. 
Jevons  thus  distinguished  between  inference  and  measure- 
ment, but  was  misled  by  a  faulty  psychology. 

The  majority  of  Marginists  defended  mathematics 
from  either  the  logical  or  the  practical  standpoint.  That 
is,  they  recommended  the  use  of  algebraic  symbols  and 
graphs  when  not  sure  of  the  possibility  of  exact  meas- 
urements, nor  perhaps  of  the  adequacy  of  coordination 
for  economic  ends.  In  both  cases  the  mathematical 
method  was  said  to  be  used,  tlie  term  thus  having  a  vague 
meaning  that  only  served  to  render  more  difficult  a  final 
decision  on  tlie  subject.  Yet  it  had  been  the  belief  of 
many  Utilitarians  that  mathematics  was  ill-adapted  to 
economic  purposes.  Rau  and  Tlmencn  for  instance 
granted  the  convenience  of  mathematical  abbreviations, 
but  no  more.  Roscher  thought  human  interrelations  too 
complex  to  be  treated  by  Descartes'  geometry.^     Comte, 

"Ch.  1. 

•  Principlfis  of  Soit'nco,  .*?.  edit.,   p.   759. 
'  Thi'oiy  of  Political   l^coiioiny,   Introduction. 

» Principles  of  Political  Economy,  transl.  by  Lalor,  J.  J.,  187S,  Intro- 
duction, ch.  3,   §  2'1. 


MARGINISM  285 

J.  S.  Mill,  and  Leslie  sided  with  this  view.  Ingram  wrote : 
"Mathematics  can  indeed  formulate  ratios  of  exchange 
when  they  have  once  been  obsen'ed ;  but  it  cannot  by  any 
process  of  its  own  determine  those  ratios ;  for  quantita- 
tive conclusions  imply  quantitative  premises,  and  these 
are  wanting."  ^  Cossa  declared  the  mathematical  method 
to  be  a  mere  "convenience  of  applying  to  our  science  the 
figures  and  symbolic  forms  which  are  frequently  found 
useful  in  purely  deductive  sciences.  .  .  ."  ^^  Keynes 
thought  that  "the  mathematical  methods  in  economics 
fall  into  two  subdivisions,  the  algebraic  and  the  diagram- 
matic,'* ^^  but  shows  his  essentially  anti-mathematical 
leaning  by  the  very  statement  made. 

So  far,  of  course,  the  instances  have  been  taken  mainly 
from  Historism  or  Utilitarianism  and  it  might  hence  ap- 
pear as  if  Marginism  stood  solid  in  its  defense  of  mathe- 
matics. Yet  that  is  not  so.  Marshall,  for  instance,  ap- 
preciated the  value  of  margins,  but  said  also :  "The 
chief  use  of  pure  mathematics  in  economic  questions  seems 
to  be  in  helping  a  person  to  write  down  quickly,  shortly 
and  exactly  some  of  his  thoughts  for  his  own  use.  .  .  ."  ^^ 
The  French  Marginist  Aupetite  confessed  that  mathe- 
matical economists  "do  not  know  exactly  what  it  is  that 
binds  the  function  and  the  variable  together,  or  the  in- 
tensity of  the  satisfied  need  to  the  quantity  already  con- 
sumed" thus  disavowing  causality. ^^  And  Pierson  deemed 
mathematics  of  no  greater  value  than  lay  in  its  afford- 
ing us   "an  excellent  means    of   testing   our   conclusions, 

»  History  of  Political  Economy,  edit,  of  1S88,  p,  182. 

^o  Introduction  to  the  Study  of  Political  Economy,  transl.  by  Dyer,  L., 
p.  44. 

"  Scope  and  Method  of  Political  Economy,  p.   238,  note. 

"  Principles  of  Economics,  Preface  to  first  edition. 

"  Th6orie  de  la  Monnaie,  p.  42.  See  also  opposing  view  of  Leroy 
Beaulieu,  P.,  in  his  Traits,  4.  edit.,  vol.  1,  pp.  88-92. 


286    THE  DEVELOPMENT  OF  ECONOMICS 

by  seeing"  whether  they  can  be  set  forth  in  a  diagrammatic 
form."  1^ 

Without  going  further  into  the  subject,  one  can  gather 
sufficiently  from  the  above  quotations  what  economists 
meant  by  a  mathematical  method,  and  to  what  extent 
they  understood  the  issue  ultimately  involved.  Evidently 
no  keen  desire  was  expressed  to  differentiate  between  cor- 
relation and  causation,  averages  and  individuals,  con- 
ceptual or»empirical  laws,  questions  of  verification  versus 
proof  in  the*  abstract,  and  so  on.  The  general  feeling 
was  one  of  kindliness  toward  the  science  which  had  more 
than  any  other  set  up  syllogisms  and  systems.  Margin- 
ism  was  akin  to  mathematics  in  this  respect.  The  ex- 
pression of  a  coordination  was  put  in  lieu  of  its  explana- 
tion. Exchange  ratios  being  given,  a  means  was  desired 
for  tracing  their  changes  graphically  on  paper,  and  this 
led  to  the  use  of  analytics.  A  clear-cut  objection  like 
Ingram's  was  exceptional,  and  besides  directly  antagonis- 
tic to  the  whole  view  of  society  and  of  economic  proc- 
esses that  Marginism  had  espoused  as  the  alone  scientific. 
Marginists  consequently  found  much  that  was  worth  while 
both  in  the  form  and  in  the  substance  of  mathematical 
inquiry. 

"  Principles  of  Economics,  transl.  by  Wotzel,  A.  A.,  vol.  1,  pp.  21-22. 


CHAPTER  EIGHT 
MARGINISM   (Continued) 

H.     Principles 

Preliminary  Observation. — The  definitions  and  laws  of 
Marginism,  which  together  may  be  said  to  constitute  its 
principles,  were  of  course  based  on  its  premises.  The 
same  circumstances  that  gave  Marginism  and  Utilitarian- 
ism premises  in  common  also  gave  them  a  similar  super- 
structure ;  for  Marginism  was  a  reaction  against  His- 
torism  primarily,  not  against  what  was  fundamental  in 
the  classics.  It  was  clear  from  the  start  that  the  Mar- 
ginists  would  take  over  the  bulk  of  English  doctrines, 
including  certain  premises  and  definitions,  and  not  ex- 
cluding altogether  even  the  objective  norm  of  measure- 
ment which  had  its  inception  in  seventeenth  century  studies 
of  price. 

But  what  especially  enables  us  to  trace  a  clear  line  of 
descent  is  the  entrepreneur  view  of  economic  organiza- 
tion, which  Adam  Smith  had  qualified  somewhat  by  his 
half  theological,  half  ethical  background,  and  which  Mar- 
ginism took  over  unreservedly  from  Utilitarianism  in  the 
form  it  there  first  assumed.  The  captain  of  industry  was 
plainly  at  the  center  of  affairs.  The  appraisal  made  by 
the  employer  figured  prominently  in  the  analysis  of  price 
and  income  as  offered  by  both  Utilitarian  and  Marginal 
economists.  The  competitive  scheme  which  rested  on 
legal  axioms  relative  to  property,  contract,  and  vocation 

287 


288    THE  DEVELOPMENT  OF  ECONOMICS 

was  taken  for  granted  as  not  only  the  type  of  existing 
social  order,  but  as  something  perennial  and  universal. 
Marglnism  consequently  had  no  quarrel  with  the  general 
drift  of  Utilitarianism.  What  It  proposed  to  change,  and 
did  change,  was  the  standard  of  measurement  for  ex- 
change ratios,  and  the  explanations  given  for  the  nat- 
uralness of  the  pricing  and  distributing  process  under  In- 
vestigation. On  this  account  mainly  Marglnism  formu- 
lated tenets  and  definitions  underlying  them  which  at 
first  sight  might  appear  a  radical  Innovation  for  all  their 
kinship  with  older  beliefs. 

Definitions. — Value  was  given  two  different  meanings, 
namely,  first  a  purely  psychological,  and  secondly  a 
commercial.  From  the  former  standpoint  the  cardinal 
fact  was  man's  ability  to  feel  and  judge  and  express  his 
ideas  In  outward  acts.  Value  was  an  act  or  a  state  of 
consciousness,  an  Imputation  of  qualities  to  things  or 
deeds,  a  manifestation  of  history  that  changed  environ- 
ment and  endeavor.  The  eighteenth  century  thinkers  had 
talked  as  if  utility  were  something  Inherent  In  things. 
Not  that  the  foremost  philosophers,  either  empirical  or 
transcendental,  had  given  one  that  Impression.  Hardly ! 
But  among  economists  the  stress  upon  things  was  so  com- 
mon as  to  permit  the  charge  later  made.  Hence  toward 
the  beginning  of  the  next  century  critics  went  out  of 
their  way  to  denounce  the  claim  of  "absolute"  value, 
meaning  tliat  utility  Is  not  an  inseparable  part  of  goods 
In  the  market.  During  the  last  generation,  however,  the 
word  "absolute  value"  has  come  into  use  again,  and  now 
we  contrast  It  with  exchange-ratios  which  to  orthodox 
Marglnism  were  the  only  values  of  economics.  The  act 
of  Imputation  was  studied.  The  subjective  nature  of 
value  seemed  obvious,  even  If  much  was  said  about 
it.     But  it  was  in  most  cases  added  that  while  valuation 


MARGINISM  289 

formed  a  notable  part  of  psychological  analysis,  the  im- 
mediate concern  of  economists  was  value  as  exhibited  in 
exchange.  Jevons  was  not  without  reason  persistent  in 
his  reiteration  of  this  familiar  fact,  for  according  to 
Marglnism  everything  depended  on  our  having  an  index 
of  those  psychological  forces  that  Hume  and  Mill  had 
tried  in  vain  to  subject  to  experimental  methods.  Ratios, 
not  absolutes !  Fractions,  not  entities !  Differentials, 
not  totals !  Margins,  not  initial  response  or  satisfac- 
tion! Here  were  contrasts  to  conjure  with  and  to  ex- 
ploit In  a  scheme  of  pecuniary  comparisons. 

What  measured  utility  was  want,  and  want  itself  served 
as  a  key  to  pleasure  and  price.  Utility  was  anything 
capable  of  gratifying  any  want  whatsoever — a  notion 
warmly  welcomed  by  the  Utilitarians  in  their  own  in- 
quiries. Scarcity  was  insufficiency  of  supply  relative  to 
demand  under  given  circumstances  at  a  fixed  time  and 
place.  If  things  tangible  or  intangUble  were  useful  and 
scarce,  and  transferable  by  enactment  of  law,  they  be- 
came valuable  by  that  fact.  Moral  questions,  as  we 
have  seen,  had  no  part  in  this  diagnosis.  The  existence 
of  a  monetary  standard  was  reckoned  with,  but  not 
logically  necessary,  for  in  exchanging  one  unit  of  a  good 
for  units  of  another  a  price  at  once  emerged,  the  ratio 
being  just  as  real  that  way  as  when  money  intervened 
because  of  the  economy  attained  in  introducing  a  gen- 
eral denominator. 

The  force  of  the  new  concept  lay  in  Its  independence 
of  old-time  costs.  Cost  now  was  no  original  element  in 
value.  Cost  had  to  be  explained  through  supply,  if  a  re- 
lationship was  desired.  Concrete  objects  ceased  to  be  the 
sole  subject  for  measurement.  Stuff  was  In  no  wise  in- 
volved, except  incidentally.  The  logician  could  argue  so, 
even  if  governments  and  sociologists  wondered  at  the  re- 


290     THE  DEVELOPMENT  OF  ECONOMICS 

suits.  Goods,  however,  were  known  to  be  ephemeral  or 
durable.  Some  could  be  used  only  once ;  others  many 
times.  Some  deteriorated  physically  while,  or  without, 
being  used;  others  might  remain  intact  in  any  but  the 
economic  sense.  Furthermore,  some  values  depended  on 
the  existence  of  a  single  article  or  service,  while  many  were 
"complementary,"  as  for  instance  the  parts  of  an  auto- 
mobile or  of  any  combination  of  things  in  production  and 
consumption. 

Wealth  was  a  fund  of  values  rather  than  a  conglomera- 
tion of  things  physical.  Notliing  mattered  from  the  in- 
dividual viewpoint  except  a  possession  of  values,  now 
simply  rights  to  things,  now  imbedded  in  tangible  assets. 
A  difference  between  private  and  social  norms  of  ap- 
praisal was  admitted  as  frankly  by  the  Marginists  as 
by  Utilitarians  from  Say  and  Lauderdale  up,  but  their 
choice  lay,  nevertheless,  with  the  former.  Non-pecuniary 
values,  i.e.,  utilities  or  wealth  not  marketable  or  not  at  a 
given  moment  part  of  open  market  operations,  were  shut 
out  of  the  system.  They  could  be  considered  as  extra- 
neous matter  or  data  furnishing  sidelights  on  economic 
problems  proper,  yet  the  line  between  the  two  was  hard 
and  fast.  The  definition  of  production  proved  this  con- 
vincingly. 

Production  consisted  of  a  creation  of  values.  The 
Utilitarians  popularized  this  idea,  and  many  half-hearted 
critics  of  both  Mill  and  Marginism  assented  to  it.  Thus 
Gide,  in  commenting  on  the  errors  of  Physiocratism, 
writes :  "The  essence  of  production  is  not  the  creation 
of  matter,  but  simply  the  accretion  of  value.'*  ^  Pre- 
cisely so.  Any  addition  to  values  individually  owned 
formed  for  that  owner  a  proof  of  production.      The  act 

^  Oldp,  CI).,  and  Rist,  Cb.,  Tfistory  of  Kconomic  Doctrines,  transl.  by 
Richards,  R.,  from  French  edition  of  1913  ;  p.  10. 


MARGINISM  291 

of  production  was  the  act  of  acquisition  itself  so  long 
as  legal  limits  were  observed.  Stuff  might  be  a  conditio 
sine  qua  non  for  collectivists ;  Marginism  was  not  blind 
to  this  fact.  But  what  counted  in  its  analysis  was  crea- 
tion of  values,  value  being  previously  defined.  Produc- 
tion consequently  need  involve  only  a  sale  of  rights,  as 
in  the  lending  out  of  wealth.  No  manual  or  mental  labor 
was  necessarily  implied.  An  individualistic  standard 
could  dispense  with  such  presuppositions.  And  similarly 
productivity^  was  a  rate  of  production  per  one  or  more 
of  several  standards ;  perhaps  per  population,  or  per 
time  unit,  or  per  monetary  values  spent.  It  mattered 
not,  though  ordinarily,  and  again  in  conformity  to 
premises,  productivity  could  mean  no  more  than  rate  of 
production  (income)  per  unit  of  expense  (outgo).  The 
rest  encroached  upon  the  exchange  mechanism. 

Capital  had  long  been  defined  in  either  a  stuff  or  value 
sense.  Boehm-Bawerk  astonished  his  readers  by  the  long 
list  of  interpretations  collected  and  collated  with  much 
assiduity.  As  he  showed,  though  not  without  having 
others  to  guide  him,  rights  could  not  be  included  among 
the  wealth  of  a  nation  under  any  but  the  competitive 
standpoint.  The  Historical  group  and  the  Katheder- 
Soclalists  had  devoted  considerable  time  to  this  ques- 
tion. As  part  of  their  regular  work  men  like  Wagner, 
Schmoller,  and  Ely  ^  went  Into  the  history  of  property 
and  contract,  making  clear  their  relation  to  any  one  sys- 
tem such  as  Utilitarianism,  and  honoring  thereby  some  of 
the  thoughts  so  predominant  in  Marx.  Capital,  Boehm- 
Bawerk  said,  "we  shall  call  a  group  of  products  which 
serve  as  means  to  the  acquisition  of  goods."  ^     Capital, 

^  Property  and  Contract  in  Their  Relation  to  the  Distribution  of 
Wealth  ;  two  volumes,  1914.  See  also  Boehm-Bawerk,  E.  von.  Rechte  und 
Verhaltnisse  vom  Standpunkte  der  Volkswirtschaftlichen  Giiterlehre,  1881. 

^  Positive  Theory  of  Capital,  transl.  by  Smart,  W.,  1893,  pp.  38  and  59. 


292     THE  DEVELOPMENT  OF  ECONOMICS 

said  Philippovich,  is  "a  power  to  earn  expressed  in  terms 
of  money."  *  Capital,  conceded  Davenport,  is  "wealth 
held  for  increment ;  .  .  .  wealth  in  time,"  ^  etc. 

Capital,  in  other  words,  originated  independent  of 
labor  or  savings,  or  at  any  rate  could  so  originate.  It  was 
a  fund  of  values  due  perhaps  to  appreciation  or  to  acquisi- 
tion of  privilege  unexpected  by  the  benefitee.  Capital 
was  a  fund  of  values  like  wealth,  but  with  this  difference 
that  it  must  be  employed  productively,  production  hav- 
ing been  defined  before.  Since  production  involved  crea- 
tion of  values,  and  since  values  were  subjective,  imputed 
by  man  in  time  and  space,  it  followed  that  productive 
use  also  was  an  instance  of  imputation,  something  ex- 
ternal to  the  thing  itself,  even  if  perchance  it  did  take 
tangible  form.  Items  of  wealth  were  capital  according 
to  whether  a  profit  would  ensue  in  the  course  of  the  em- 
ployment of  such  wealth,  or  not.  Publicly  owned  wealth 
was  not,  under  this  caption,  "capital,"  nor  goods  used 
within  the  privacy  of  a  home.  But  transferred  to  a  busi- 
ness unit,  or  temporarily  utilized  in  activities  making 
matter  for  exchange  the  same  wealth  was  capital.  Suc- 
cessive incomes  or  rights  to  income  could  be  added  to 
constitute  capital.  Capitalization  was  an  act  of  com- 
puting such  rights  according  to  certain  principles. 
What  had  no  substance  might  yet  be  all  important. 
What  was  not  yet,  could  nonetheless  create  capital,  as 
when  rights  to  goods  not  yet  available  provided  a  basis 
for  capitalization.  And  withal,  from  the  personal  stand- 
point, the  value  of  rights  or  things  varied  inevitably  witli 
the  value  of  their  products  in  concrete  or  inconcrctc 
shape,  so  that  not  only  the  cause,  but  also  the  measure 

*<^rundriss  dor  Politischcn  okonomic,  9.  edit.,  vol.  1,  p.  37. 
•  Value  and  LMstribution,  pp.  146-47. 


MARGINISM  293 

of  capital  was  a  pending  income,  a  hypothetical  or  actual 
right  (in  the  future)  to  goods. 

The  notion  of  cost — ignoring  for  the  nonce  the  inter- 
esting fact  that  the  word  and  idea  lingered  in  the  Mar- 
ginist*s  mind — accorded  well  with  the  definitions  just 
given.  Costs  were  under  ideal  circumstances  outlays  of 
value,  estimated  now  as  of  the  present  or  near  future, 
now  as  of  the  time  they  occurred.  Money  would  meas- 
ure the  costs,  though  not  necessarily.  Loss  of  oppor- 
tunity also  figured  as  cost,  that  is  if  a  larger  potential 
gain  was  forfeited  for  a  smaller  actual  one.  Labor-pain 
was  cost,  and  lastly,  too,  the  pain  of  abstinence  or  of 
anticipation  which  was  somehow,  implicitly,  contrasted 
with  the  joy  of  realization.  Impatience  was  a  cost,  it  was 
argued.  It  had  to  figure  In  price,  business  accounting 
leaving  no  option  in  this  matter.  It  was  granted,  how- 
ever, that,  as  to  labor-pain,  consumption  utilities  should 
offset  it,  this  being  an  object  of  solicitude  for  both 
Gossen  and  Jevons,  and  indeed  for  others  more  recently. 

When  it  came  next  to  defining  the  terms  relating  to 
the  marketing  process  a  market  was  regularly  defined 
as  something  like  a  meeting-place  of  buyers  and  sellers. 
On  the  question  of  demand  a  split  occurred  because  some 
held  it  to  be  simply  want  accompanied  by  purchasing- 
power,  while  others  thought  of  it  as  an  offer  of  a  definite 
sum  of  values  for  the  things  to  be  bought,  and  others 
still  as  the  purchase  itself.  It  was  asked :  Was  there 
any  "demand"  if  nothing  was  really  bought?  The  re- 
plies varied.^ 

Supply,  however,  seemed  less  elusive  a  term.  It  figured 
as  offer  of  values  for  sale  at  certain  prices,  not  neces- 
sarily at  only  one  price.     Consumption  was  the  destruc- 

•  For  double  meaning  of  the  term  see,  e.  g.,  Fetter,  F.  A.  Economic 
Principles,  1915,  vol.  1,  p.  46. 


294.    THE  DEVELOPMENT  OF  ECONOMICS 

tion  of  values  either  with  or  without  use,  agreement  on 
this  point  never  having  been  reached.  That  depreciation 
alone   counted,    and   not   deterioration,   was    self-evident. 

However,  what  of  the  place  of  consumption  in  the 
Marginal  scheme.?  In  the  opinion  of  some  its  definition 
was  the  hardest  part  because  of  uncertainty  as  to  its 
role  in  economics.  Sax  for  instance  wrote:  "Consump- 
tion as  such  isn't  part  of  economics,  though  the  economic 
process  involved  must  be."  ''  Pierson  believed :  "There 
is  no  such  thing  as  a  theory  of  consumption  in  the  sense 
of  a  branch  of  the  science  of  economics."  ^  Schumpeter 
shared  this  view  which  had  long  been  advanced  by  promi- 
nent Utilitarians.^  On  the  other  hand,  Jevons  was 
anxious  to  show  that  "the  whole  theory  of  Economy  de- 
pends upon  a  correct  theory  of  consumption,"  ^^  while 
Keynes  declared:  "A  true  theory  of  consumption  is  the 
keystone  of  political  econom},"  not  denying  that  it  would 
be  a  premise  rather  "than  constituting  in  itself  an  eco- 
nomic law  or  laws  on  a  par  with  the  laws  of  production, 
distribution,  and  exchange."  ^^  Some  of  the  best-known 
Marginists,  especially  those  with  a  critical  penchant,  de- 
veloped the  concept  of  consumption  into  something  al- 
together separate  from  the  psychology  of  valuation,  or 
if  not,  thought  of  consumption  in  connection  with  price 
analysis  rather  than  of  the  aspects  most  natural  to  a 
collectivistic  philosophy.  Consumer's  rent  also  loomed 
up  as  an  item  in  the  subject  mainly  because  total  utilities 
were  compared  with  marginal  ones,  these  latter  further- 
more becoming  determinants  of  price. 

The    productive    machinery    turned    on    four    factors 

'  Woson  und  Aufgabe  dor  Nationalokonomie,  1884,  p.  19. 

"  Principles  of  Economics,  transl.  by  Wotzel,  A.  A.,  edit,  of  1913,  vol. 
1,  p.  42. 

»  Wescn  und  Ilauptinlialt  dor  Theoretischen  Nationalokonomie,  p.  585. 
See  also  Table  Two  of  this  l)ook. 

>"  Theory  of  I'olitical  Kconomy,  ch.  3. 

''  Scope  and  Method  of  I'olitical  Economy,  p.  107. 


MARGINISM  296 

wliich  might  or  might  not  be  living  or  inert  elements. 
For  production  being  defined,  a  "factor"  of  production 
was  any  instrument  for  income.  Either  a  right  or  an 
active  agent  constituted  a  "factor."  Labor  was  one,  and 
"whatever  effort  serves  the  acquisitive  end  is  labor."  ^^ 
Productive  effort  was  another  characterization  of  labor, 
but  too  general  when  distribution  had  to  be  discussed. 
Land  was  of  course  in  one  sense  a  physical  item.  All 
matter  like  soil  or  timber  or  water-falls  or  minerals  in 
the  bowels  of  the  earth  constituted  such  a  factor.  But 
sites  and  rights  might  be  "land"  just  as  well.  And  enter- 
prise— to  conclude  our  survey — consisted  of  the  manage- 
ment of  the  otlicr  tliree  factors,  the  share  for  this  agent 
being  a  peculiar  compound  of  several  values,  not  all  of 
which  could  always  be  brought  under  the  headings  al- 
lowed. 

Laws  of  Marginism:  Production. — The  laws  that  Mar- 
ginism  derived  directly  from  these  definitions  with  the  aid 
of  certain  environmental  studies  related  naturally  to  pro- 
duction, price,  and  distribution.  Occasionally  the  same 
principles  were  discussed  under  Exchange  or  under  Con- 
sumption, notably  when  the  strictly  static  competitive 
viewpoint  gave  way  to  a  dynamic  and  social  one.  How- 
ever, it  became  clear  after  a  generation  of  analysis  that 
nothing  essentially  new  in  the  shape  of  laws  could  be 
added  to  what  Utilitarianism  had  discovered.  Explana- 
tions deviated  from  the  customary,  but  the  law  itself 
either  remained  the  same  or  was  reinterpreted  so  as  to 
cover  more  than  first  suspected. 

As  to  production,  the  physical  aspect  was  not  ignored 
by  Marginists  any  more  than  by  Utilitarian  economics. 
Because  of  the  relation  between  supply  and  population, 
and  between  supply  and  price  both  groups  busied  them- 

"  Davenport,  II.  J.     Economics  of  Enterprise,  p.  127. 


296     THE  DEVELOPMENT  OF  ECONOMICS 

selves  with  productivity  in  terms  of  materials  or  services 
as  such.  But  what  had  happened  even  before  the  days 
of  Marginism  happened  again,  namely,  the  law  which  by 
the  earliest  writers  had  been  supposed  to  be  peculiar  to 
agriculture  was  shown  to  apply  everywhere.  Increas- 
ingly it  came  to  be  understood  as  a  criticism  of  the  Utili- 
tarian laws  of  distribution  that  the  idea  of  diminishing 
returns  was  merely  a  piece  of  fiction  due  to  the  assump- 
tion of  one  single  use  of  the  soil.  Diversified  agriculture 
and  the  natural  course  of  improvements,  it  had  been 
pointed  out  even  by  Rae  and  Carey,  would  counteract 
much  of  the  lamented  stinginess  of  nature.  However, 
the  main  contribution  of  Marginism  lay  not  in  this  un- 
orthodox treatment  of  a  static  concept,  but  in  the  de- 
monstration that  the  law  of  diminishing  returns,  the 
return  being  a  fund  of  values,  really  comprised  the  two 
laws  of  the  proportionality  of  factors  and  of  "advantage 
and  size."  That  is,  any  one  of  any  given  number  of 
agents  in  a  productive  process  could  be  increased  so  that, 
beyond  a  certain  point,  the  total  monetary  return  was 
less  than  proportionate.  Disproportionate  outlay  in  this 
sense  attended  all  efforts  to  add  to  any  one  factor  in- 
definitely. What  was  true  of  capital  was  true  of  land  or 
of  labor  or  of  enterprise. 

Laws  of  fatigue  and  of  diminishing  utility  helped  to 
suggest  this  rather  obvious  principle.  The  notion  of 
capital  as  a  fund  of  values  convertible  into  many  specific 
forms  of  wealth  was  a  further  help  in  the  right  direction. 
Mobility  here  meant  for  the  extension  of  the  law  of  de- 
creasing productivity  what  earlier  it  had  been  to  the 
establishment  of  a  single  price  for  any  one  article  or 
service  under  perfect  competition.  But  of  course  what 
the  restatement  really  implied  was  that  there  was  only 
one  best  way  of  doing  things.     An  Absolute  always  may 


MARGINISM  297 

be  predicated  even  though  practice  knows  only  approxima- 
tions !  Since  production  almost  invariably  involved  the 
use  of  more  than  one  "factor,"  even  as  Marginism  under- 
stood the  word,  the  problem  was  to  find  a  right  propor- 
tion for  each  and  all  of  such  factors.  Under  communism 
such  as  Wieser  liked  to  imagine,  in  order  to  elucidate  his 
value  theorems,  the  ratios  would  be  of  stuff  more  than  of 
values  predetermined.  It  was  simply  a  matter  of  dis- 
covering the  recipe  by  which  the  cake  could  be  baked 
best.  In  the  midst  of  competitive  conditions  as  Mar- 
ginism postulated  them,  on  the  other  hand,  the  pecuniary 
norm  would  be  decisive.  The  law  of  proportions  was 
observed  when  any  one  producer  had  obtained  a  maximum 
product  respectively  profit  at  a  given  time  and  place, 
everything  being  reckoned  by  dollars  and  cents.  The  idea 
of  balanced  rations  in  consumption  therefore,  which 
German  Marginists  had  in  1889  ^^  broached,  took  on  a 
new  aspect  when  transplanted  to  the  field  of  production. 
The  Italian  economist  Pantaleoni  (not  altogether  given 
over  to  the  Marginal  idea!)  remarked  in  his  "Pure  Eco- 
nomics," 1889:  "If  all  the  complementary  commodities 
requisite  for  the  production  of  a  direct  commodity  are 
present  in  different  quantities,  the  quantity  of  the  com- 
plementary commodity  that  is  present  in  a  lesser  quantity 
than  any  other,  is  that  which  determines  the  quantity 
that  can  be  produced  of  the  direct  commodity  in  ques- 
tion, the  superfluous  quantities  of  the  other  complemen- 
tary commodities  being,  for  this  purpose,  destitute  of 
utility."  ^■^  This  declaration,  though  stressing  subjective 
facts  in  the  appraisal  of  goods,  was  an  earnest  of  what 
was  soon  to  follow  when  Marginism  passed  over  into 
American  hands.     Pantaleoni  and  Pareto,  the  formulator 

"  Auspltz,  R.,  und  Lieben,  R.     Untersuchungen  ueber  die  Theorie  des 
Preises,  Part  IV. 

'♦  Pure  Economics,  transl.  by  Bruce,  T.  B.,  1898,  p.  83. 


298     THE  DEVELOPMENT  OF  ECONOMICS 

of  the  law  of  "the  variability  of  coefficients  of  produc- 
tion," ^^  anticipated  the  more  perfect  treatments  of  the 
next  decade. 

What  became  of  diminishing  returns  is  easily  seen  if 
one  remembers  that  value-creation  rather  than  stuff- 
conversion  figured  as  production,  and  that  value  or  price 
had  both  been  made  functions  of  supply  no  less  than  of 
demand,  even  by  Utilitarians.  The  law  of  proportions 
was  a  functional  view  of  returns,  just  as  Walras  had 
correlated  supplies  of  a  variety  of  goods  with  particular 
demands,  and  Wieser  several  uses  of  one  and  the  same  con- 
stituent with  the  price  of  lowest  use  in  any  one  article. 
Any  factor,  nay,  any  physical  item  in  the  whole  set  oper- 
ating jointly  for  the  creation  of  a  value,  was  subject  to 
a  degressive  or  regressive  rate.  A  simple  formula  could 
take  care  of  the  situation  if  the  number  of  factors  were 
not  greater  than  that  permitted  by  Marginism.  It  would 
read :  "If  x  with  y  will  produce  p ;  then  ax  with  y  will 
produce  more  than  p,  but  less  than  ap ;  and  x  with  ay 
will  produce  more  than  p,  but  less  than  ap."  ^^  And  the 
law  of  size  would  call  attention  either  to  the  possibility 
of  rising  returns  in  any  industry  (technologically  meas- 
ured), or  to  the  mere  difference  between  ratios  and  ag- 
gregates of  factors  used.  The  technological  phases  of 
course  need  not  occupy  the  Marginist,  but  ho  should  know 
that  "the  most  profitable  size  for  the  establishment  is 
that  under  which  the  marginal  product  of  all  the  factors 
combined  will  just  equal  their  cost."  ^"^      [Italics  mine.] 

Price. — The  price  analysis  of  Marginism  was  com- 
pleted before  that  of  productiveness  or  distribution. 
The  founders  had  said  little  on  production,  and  no  more 

"  Manuel  d'ficonomie  Politique,  French  translation  of  1909,  ch.  5,  §  70. 

"  Carver,  Th.  N.     The  Distribution  of  Wealth.  1904,  p.  8(i. 

"  Ibidem,  p.  90.     See  also  Davenport,  Economics  of  Enterprise,  ch.  23. 


MARGINISM  299 

than  outlined  the  apph'cations  of  marginal  utility  to  In- 
comes. Their  price,  however,  was  essentially  that  of  the 
next  quarter  century.  For  both  the  dissection  of  joint 
values  and  the  reduction  of  cost  to  utility  was  work 
voluntarily  assumed  by  Jevons  and  Menger.  The  key- 
note was  this  sentence  of  Jevons  that  "labor  once  spent 
has  no  influence  on  the  future  value  of  any  article."  ^^ 
Things  and  thoughts,  i.  e.,  goods  used  in  production  and 
demands  growing  out  of  feelings  or  valuations,  should 
be  kept  absolutely  distinct.  The  task  of  the  economist 
was  not  the  establishment  of  ratios  of  materials  or  of 
labor-times,  but  of  wants  of  different  intensities.  Con- 
sequently, no  matter  what  might  be  said  of  costs,  wants 
lay  at  the  bottom  of  every  price  and  income. 

The  premises  were  the  hallowed  competitive  ones  which 
fitted  in  so  admirably  with  Benthamism  and  Association- 
ism.  Wieser,  to  be  sure,  developed  his  "Natural  Value" 
on  a  fictitious  communism,  but  that  was  only  because  he 
never  reached  beyond  valuation  and  imputation.  He  gave 
the  psycholorjy  of  wanting  and  estimating  the  ingredients 
of  an  ensemble,  and  showed  how  the  attribution  of  exact 
values  to  each  of  several  joint  items  in  a  commodity  might 
bear  on  the  analysis  of  income.  But  there  he  stopped. 
"Natural  value  shall  be  that  which  would  be  recognized 
by  a  completely  organic  and  most  highly  rational  com- 
munity." ^''^  Ignored  were  "the  actual  imperfections  of 
valuation,  the  individualism  of  our  economy,  and  finally 
the  inequality  of  wealth,"  ^^  probably  for  the  simple 
reason  that  "the  question  how  it  is  possible  to  unite  those 
divergent  individual  valuations  into  one  social  valuation 
is  one  not  to  be  answered  quite  so  easily  as  those  imagine 

"Theory  of  Political  Economy,  3.  edit.,  p.  164. 
'"Translation  by  Malloch,  Ch.  A.,  edit,  of  1893,  p.  61. 
">  Ibidem,  p.  282. 


300    THE  DEVELOPMENT  OF  ECONOMICS 

who  are  rash  enough  to  conclude  that  price  represents  the 
social  estimate  of  value."  ^^ 

To  another  Marginist  in  America  the  competitive 
postulate  therefore  was  preferable  if  one  could  eliminate 
all  minor  disturbances.  And  so  we  are  told:  "Reduce 
society  to  a  stationary  state,  let  industry  go  on  with 
entire  freedom,  make  labor  and  capital  absolutely  mobile 
— as  free  to  move  from  employment  to  employment  as 
they  are  supposed  to  be  in  the  theoretical  world  that 
figures  in  Ricardo's  studies — and  you  will  have  a  regime 
of  natural  values"  ^^  [italics  mine].  The  dynamic  view 
deserved  mention,  but  failed  to  be  systematized  even  when 
promised.  The  static  individualistic  view  alone  satisfied 
the  requirements  of  an  exact  economics.  Valuations 
could  thus  only  be  translated  into  prices ;  and  costs 
would  represent  but  the  obverse  side  of  the  coin.  "The 
law  of  costs,"  wrote  Wieser,  "is  the  general  law  of  values 
looked  at  from  a  particular  angle."  ^^ 

Wants  were  everything.  Wants  graded  into  many 
intensities  per  moment  or  over  a  period  of  time,  say  in 
an  act  of  consumption.  Margins  of  utility  were  tanta- 
mount to  margins  of  value  as  the  economist  studied  them, 
i.  e.,  to  exchange  ratios  or  prices.  Since  all  units  in  a 
homogeneous  supply  were  practically  interchangeable, 
(when  at  all  distinguishable  physically)  any  one  might 
take  the  place  of  another,  and  the  degrees  of  satisfaction 
accruing  from  the  use  of  each,  though  differing  to  the 
consumer  as  he  added  successively  one  to  the  other  dur- 
ing consumption,  could  be  made  alike  for  all  when  the 
order  of  use  was  changed.  Hence  "the  value  of  a  supply 
of  similar  goods  is  equal  to  the  sum  of  the  items  multi- 

"  Ibidem,  p.  52. 

"Clark,  J.  B.     The  Distribution  of  Wealth,  1899,  p.  29. 

"  Ursprung  und  Ilauptgesotze  des  WirtschaftHchen  Werthes,  p.  159. 


MARGINISM  301 

plied  by  the  marginal  utility."  ^^  The  exact  determi- 
nants of  a  price  consisted  of  the  number  of  dealers  in 
the  transaction,  of  the  intensities  of  want,  and  of  the 
amount  of  goods  for  sale.  The  question  of  causation 
might  be  ignored  as  something  outside  the  pale  of  eco- 
nomic inquiry, — a  point  that  had  not  been  granted  at  the 
outset ! — but  the  possibility  of  exact  measurement 
would  remain  incontestable.  "Price  is  always  equal  to 
the  reciprocal  value  of  the  marginal  utility  ratio  of  ex- 
changed goods."  ^^  "A  logical  market-price  is  that  price 
common  to  all  trades  made  at  the  time,  which  permits 
the  maximum  number  of  transfers  with  some  gain  to  both 
parties,"  ^^  the  gain  being  such  as  followed  from  an  ex- 
change of  different  preferences  with  respect  to  any  one 
or  to  several  commodities.  "The  value  of  a  unit  of  any 
commodity  depends  upon  the  supply  of  the  commodity 
and  the  demand  for  it,  varying  inversely  with  the  supply 
and  directly  with  the  demand,  the  supply  being  defined 
as  the  amount  on  hand,  or  available  at  the  time  and 
place ;  and  the  demand  being  defined  as  the  desire  for 
the  commodity  coupled  with  the  ability  to  purchase 
it."  "^  "The  price  finally  established  is  the  money  equiva- 
lent of  the  marginal  utility  of  the  good  to  the  buyer 
who  is  just  willing  to  pay  that  price,  whom  we  may  con- 
veniently designate  as  the  marginal  buyer.  Who  the 
marginal  buyer  shall  be  depends  of  course  on  the  supply 
price  scale  for  the  particular  good  as  well  as  on  the  de- 
mand price  scale."  ^^  Prices  themselves,  in  other  words, 
helped  to  determine  supply  and  demand. 

The  causal  relation  between  demands  and  supplies,  as 

-*  Wieser,  F.  von,  Natural  Value  (transl.  by  Malloch,  Ch.  A.,  1893, 
from  the  German),  p.  25. 

-'^  Schunipeter,  J.     Wesen  und  Hauptinhalt,  p.  273. 

"  Fetter,  F.  A.     Economic  Principles,  vol.   1,  p.  66. 

"  Carver,  Th.  N.     Distribution  of  Wealth,  p.  25. 

-"  Seager,  H.  R.  Principles  of  Economics,  1913,  p.  119.  Also :  Ely, 
R.  T.,  and  collaborators,  Outlines  of  Economics,  1917,  p.  156. 


302     THE  DEVELOPMENT  OF  ECONOMICS 

well  as  the  use  of  such  words  as  "determine"  and  "fixed 
by,"  is  here  seen  to  be  side-stepped  in  the  desire  to  es- 
tablish an  equation  rather  than  a  law  expressive  of  im- 
mutable sequences.  What  was  aimed  at  in  discussions 
was  the  comparison  of  wants  or  marginal  utilities,  whose 
equivalence  with  purchase  prices  was,  at  the  outset,  taken 
for  granted.  The  competitive  principle  alone  needed 
emphasis  if  anything  definite  were  to  be  settled.  Mo- 
nopoly was  felt  to  be  exceptional,  always  potentially  on 
the  wane,  and  furthermore  no  exception  to  the  hedonistic 
criterion,  though  when  operative  It  fixed  price  "always 
at  the  point  of  maximum  monopoly  revenue"  ^^  rather 
than  at  a  point  favoring  the  largest  number  of  sales. 
And  as  for  the  complicated  case  of  a  good  serving  many 
uses,  embodied  in  different  classes  of  goods,  it  followed 
from  the  leading  theorem  that  the  least  valuable  use  fixed 
the  value  of  all  units  for  all  uses.  Marginal  utility  here 
referred  to  different  uses  of  one  and  the  same  homo- 
geneous stock,  and  "no  unit  of  the  entire  stock  can  be 
valued  at  a  higher  return"  ^^  than  that  represented  by 
the  least  valued  use. 

So  much  for  the  demand  or  valuation  side  of  price 
analysis.  If  now  one  asked  what  became  of  costs,  the 
reply  was  as  stated  a  while  ago :  Costs  are  valuations  or 
marginal  utilities  of  the  past  viewed  by  the  entrepreneur 
as  monetary  outlays  for  concrete  things  or  for  services. 
All  costs  were  necessarily  values.  Only  the  business-man 
thought  of  things  and  expenses ;  the  economist  took  a 
larger  view,  seeing  tlie  interdependence  between  all  valua- 
tions that  entered  Into  a  productive  process.  There 
was  no  separate  cost,  no  opposition  between  It  and  mar- 
ginal utility.     "The  opposition  between  costs  and  utility 

"  Seligman,    E.    R.    A.      Principlos    of    Economics,    1910,    p.    sriO :    and 
Wipspr.  l'\  von,  Natural  Value  (Malloch's  translation),  Book  5,  ch.  4. 
"  Wiescr,  Natural  Value,  p.   9!). 


MARGINISM  303 

is  only  that  between  the  utility  of  the  individual  case,  and 
utility  on  the  whole,"  ^^  the  chief  explanation  of  this 
statement  being  the  operation  of  marginal  utility  over  the 
"entire  field  of  cognate  production."  ^"  "The  price  of  a 
good  is  equal  to  its  marginal  utility  as  well  as  to  the 
expense  of  the  last  particle  sold."  ^^  If  a  difference 
existed  between  expense  and  price  the  time-element  witli 
its  multitudinous  aberrations,  objective  and  subjective, 
must  be  held  responsible.  It  was  not  likely  that  an  esti- 
mate of  any  one  person  should  last  forever,  or  that  esti- 
mates of  different  people  for  goods  undergoing  many 
stages  of  production  should  tally  from  beginning  to  end 
with  the  sums  spent  by  producers.  An  average  had  to 
be  imagined.  A  representative  firm  of  producers  might 
meet  the  changes  so  as  to  balance  values  and  costs,  but 
in  an  age  of  disequilibrium  such  as  the  present  "the  equi- 
librium of  normal  demand  and  supply  does  not  thus  cor- 
respond to  any  distinct  relation  of  a  certain  aggregate 
of  pleasures  got  from  the  consumption  of  the  commodity 
and  an  aggregate  of  efforts  and  sacrifices  involved  In  pro- 
ducing them.  .  .  ."  ^'*  In  the  long  run,  or  else  in  a  per- 
fectly stationary  society,  costs  and  marginal  bids  will 
make  an  equation ;  not  otherwise. 

Costs,  be  they  of  original  production  or  of  reproduc- 
tion, were  values  whether  viewed  as  things  or  as  feelings 
of  disutility.  In  one  sense  expenses  of  production  con- 
sisted of  "the  exertions  of  all  the  different  kinds  of  labor 
that  are  dlrectl}'  or  indirectly  involved  in  making  It, 
together  with  the  abstinences  or  rather  the  waitings 
required  for  saving  the  capital  used  In  making  it  .  .  .  ;"  ^^ 

'>  Ibidem,  p.  183. 
"  Ibidem. 

"  Auspitz,  R.,  und  Lieben,  R.  Untersuchungen  ueber  die  Theorie  des 
Preises,  p.  x. 

^*  Marshall,  A.     Principles  of  Economics,  p.  458. 
"  Ibidem,  p.  399. 


304    THE  DEVELOPMENT  OF  ECONOMICS 

in  another  sense  "the  cost  of  a  commodity  is  any  pain 
that  must  be  submitted  to  in  order  to  obtain  it."  ^®  Pain, 
physical  or  mental,  opportunity  cost  or  forfeit  of  alter- 
native gains,  impatience  and  an  excess  of  producer-pain 
over  consumer-pleasure — all  these  were  ideas  built  at 
various  times  into  the  cost  account  from  the  subjective 
viewpoint. 

However,  try  as  they  might,  Marginists  could  not  get 
away  entirely  from  objective  costs  any  more  than  the 
Utilitarians.  Things  and  their  quantities  had  to  be 
noticed  and  reckoned  with.  Costs  of  the  old  sort  there- 
fore did  figure  in  the  Marginal  analysis,  except  that 
they  were  made  to  act  upon  supply  first,  and  thus  upon 
demand  or  valuations.  It  was  shown  that  laws  of  fatigue 
and  the  instinct  for  equalizing  pain  and  pleasure,  wholly 
apart  from  laws  of  return  by  weight  and  tale,  determined 
supply,  which  itself  related  to  want  intensities.  And  so 
cost  and  demand  early  appeared  as  complementaries  in 
pricing.  Marshall  was  concerned  particularly  with  this 
aspect,  but  Jevons  before  him  had  summed  up  the  mat- 
ter in  the  words :  "The  quantities  of  commodity  given  or 
received  in  exchange  are  directly  proportional  to  the 
degrees  of  productiveness  of  labor  applied  to  their  pro- 
duction, and  inversely  proportional  to  the  values  and 
prices  of  their  final  degrees  of  utility."  ^^  A  minor  ques- 
tion only  would  be,  how  differential  costs  affected  price, 
and  here  the  answer  according  to  a  later  American 
writer  was :  .  .  .  "the  supply  of  a  particular  product 
in  any  market  is  at  last  limited  by  cost  to  marginal  pro- 
ducers or  of  marginal  portions  of  supply,"  ^^  a  view 
shared  by  others  before  and  since. 

"  Pantaleoni,  M.     Pure  Kconomica,  189S,  p.  101. 
"Theory  of  Political  Economy,  edit,  of  1S79,   p.  209. 
"  Fetter,  F.  A.     Eeonoiiiic  I'rinciples,  vol.  1,  p.  370.     See  also  Wieser, 
Natural  Value,  Book  5,  ch.  5. 


MARGINISM  306 

But  this  being  the  case  for  prices  of  things,  what  then 
of  incomes? 

Distribution. — Marginism  on  this  subject  could  not  say 
much  more  than  Utilitarianism,  since  both  were  static  in 
their  interpretation  of  human  nature  and  of  social  proc- 
esses. Distribution  correspondingly  proved  to  be  a  con- 
test between  producers  for  a  maximum  share  in  a  fund 
of  fixed  size.  The  Ricardians  had  put  a  construction 
upon  human  nature  that  held  out  virtually  no  hopes  for 
the  great  masses.  Hence  the  motion  of  a  "dismal  sci- 
ence." Marginists  had  rejected  from  the  start  the  Mal- 
thusian  doctrine,  but  they  too  dealt  with  concepts  sug- 
gestive of  a  struggle  between  productive  factors,  or  per- 
haps between  proletariat  and  plutocracy.  Feelings  and 
marginal  valuations  took  the  place  of  outgo  in  things 
or  in  labor,  but  otherwise  little  was  changed.  Further- 
more, though  the  demand-supply  phase  of  pricing  was 
obscured  by  specific  imputations  of  productiveness,  and 
though  shares  in  general  were  thus  displaced  by  shares 
in  a  specfic  item  of  wealth  in  process  of  production, 
Marginism  stuck  closely  to  the  price-nature  of  distribu- 
tion. In  fact,  this  becomes  the  truer  the  more  exclusively 
we  think  of  the  American  or  Austrian  as  against  German, 
French,  or  English  Marginists.  Marginal  distribution 
received  most  careful  attention  among  the  former,  not 
among  the  latter. 

Menger  and  Wieser  laid  the  foundations  by  their  impu- 
tation of  values  to  constituents  in  a  compound  good. 
They  raised  the  question :  What  is  any  one  part  worth 
out  of  several  making  a  whole  finished  article?  And  they 
answered :  Find  out  by  subtracting  the  part  under  investi- 
gation from  the  rest  (Menger),  or  add  it  after  having 
ascertained  the  value  of  the  other  parts  going  into  the 
article  (Wieser).    A  distinction  had  of  course  to  be  made 


306     THE  DEVELOPMENT  OF  ECONOMICS 

between  reproducible  and  non-reproducible  items,  which 
might  have  been  extended  by  comparing  different  degrees 
of  reproducibility.  Indeed,  In  a  dynamic  treatment  this 
Imputation  to  least  and  most  growing  parts  gained  sig- 
nificance when  applied  to  "factors"  of  production  such 
as  capital,  labor,  etc.  However,  the  main  problem  was 
the  attribution  of  values  to  parts  or  agents  at  any  given 
instant  of  time. 

Imputation  then  could  move  along  several  lines.  One 
could,  for  instance,  take  the  whole  national  dividend  and 
assign  shares  to  Its  joint  producers.  Or  one  could  take 
any  one  article  and  find  the  shares.  Or  one  could  con- 
sider the  whole  output  of  a  given  plant  and  find  out  how 
much  each  factor  contributed,  respectively  claimed.  Or 
one  could  try  to  determine  the  share  of  each  unit  of  a 
single  class  of  factors,  such  as  labor,  comparing  the 
efficiency  of  each  unit  as  per  sequence  or  coexistence  of 
their  several  employments.  Thuenen  had  hit  upon  the 
marginal  productivity  Idea  a  half  century  before  Menger 
or  Wieser  resumed  his  labors.  It  was  at  any  rate  a 
fascinating  task  from  the  logical  standpoint ! 

As  to  wages,  one  either  granted  many  rates  in  dif- 
ferent regions,  or  premised  a  uniform  valuation  along 
with  the  mobility  of  labor  and  capital.  As  a  rule  the 
appeal  was  to  a  specified  field  or  production  unit.  All 
workers  of  a  kind  were  intercliangeablc,  so  that  "the 
work  that  is  left  undone  in  consequence  of  one  man*s 
departure  is  always  of  the  marginal  kind."  ^^  Under 
those  conditions  tlic  marginal  man  set  the  wage  for  all 
others,  no  matter  how  much  these  latter  might  be  assumed 
to  produce  according  to  the  law  of  diminishing  returns. 
Progress  being  assumed,  the  supra-marginal  worker  led 
the  rest;  but  in  statics  tlie  course  of  events  ran  the  other 

'"Clark,  J.  B.     Distribution  of  Wealth,  p.  103. 


MARGINISM  307 

way.  Regardless  of  margins,  "the  wages  of  a  working- 
man  arc  ultimately  coincident  with  what  he  produces, 
after  deduction  of  rent,  taxes,  and  the  interest  of  capi- 
tal," ^^  but  from  the  marginal  standpoint — to  give 
Wieser's  view — "the  ordinary  principles  of  imputation 
decide  what  share  of  the  return  may  be  ascribed  to  each 
individual  service;  and  the  value  of  this  share  obtains 
directly  as  the  value  of  the  service  which  produces  it. 
Thus  every  kind  and  quality  of  labor  shows  a  different 
result  according  to  the  available  supply,  demand,  the 
support  received  from  complementary  goods,  and  the 
technical  possibilities."  ^^ 

In  other  words,  wage-rates  varied  with  circumstances 
in  general,  and  with  ratios  of  factors  employed  in  par- 
ticular. The  manager  had  much  to  do  with  the  marginal 
productivity,  as  much  as  the  marginal  man  had  to  say 
about  the  productiveness  of  the  supra-marginal  laborers. 
Besides,  though  it  was  argued  that  "the  sum  of  all  the 
productive  contributions  exactly  exhausts  the  value  of 
the  total  return,"  ^^  this  was  open  to  debate.  It  could 
stand  only  if  one  added :  "The  imputation  of  the  produc- 
tive contribution  assigns  to  every  production  good  (re- 
spectively factor)  a  medium  share."  ^^  Whether  medium 
relative  to  fluctuations  in  time,  or  to  impracticable  indi- 
vidual imputations  for  factors  producing  jointly  an  ar- 
ticle, was  not  even  then  decided.  The  only  certain  fact 
was  the  force  of  demand-supply  in  fixing  marginal  values 
and  productivities,  a  corollary  of  which  was :  "Should  any 
one  factor  of  production — be  it  land,  capital,  or  labor — 
come  more  freely  into  our  disposal,  the  natural  rules  of 
imputation   require  that  all  the   others   obtain   a  higher 

*"  Jevons,  W.  S.     Theory  of  Political  Economy,  edit,  of  1879,  p.  292. 
"  Wieser,  F.  von,  Natural  Value,  Book  IV,  ch.  10. 
*-  Ibidem,  p.  88. 
"  Ibidem,  p.  93. 


308     THE  DEVELOPMENT  OF  ECONOMICS 

valuation;  as  they  also  require  that  all  the  factors  be 
more  highly  valued  if  there  should  be  an  all-round  in- 
crease of  personal  want  [of  goods]."  ^* 

On  such  grounds  Marginists  found  opportunity  not 
merely  to  reduce  incomes  to  prices,  or  to  determine  wages, 
but  also  to  imply  a  sort  of  ethical  justice  in  the  appor- 
tionment of  wealth.  Wieser  like  Gossen  and  Thuenen 
before  him,  shared  the  opinions  of  Jevons  in  this  respect ; 
and  later  writers  like  Clark,  J.  B.,  and  Wicksteed  in 
England  strengthened  the  argument.  Labor  got  what 
was  coming  to  it.  To  each  man  according  to  his  prod- 
uct !  This  old  slogan  of  utopianists  and  socialists  of 
diverse  shades  was  now  transformed  into  reality  by  a 
mode  of  reckoning  unknown  to  either  Smith  or  Mill. 
The  first  sentence  of  the  Preface  in  Clark^s  "Distribu- 
tion of  Wealth"  announced:  "It  is  the  purpose  of  this 
work  to  show  that  the  distribution  of  the  income  of 
society  is  controlled  by  a  natural  law,  and  that  this  law, 
if  it  worked  without  friction,  would  give  to  every  agent 
of  production  the  amount  of  wealth  which  that  agent 
creates."  And  in  Wicksteed's  "Common  Sense  of  Po- 
litical Economy,"  1910,  we  read:  "The  central  thesis  of 
this  book  is  that,  so  far  as  the  economic  forces  work 
without  friction,  they  secure  to  every  one  the  equivalent 
of  his  industrial  significance  at  the  point  of  the  industrial 
organism  at  which  he  is  placed."  ^^  Alas,  that  we  were 
not  reminded  in  the  same  breath  of  the  definition  of  utility 
and  production,  or  of  the  premises  psychological,  logical, 
and  legal,  on  which  the  analysis  rested ! 

However,  the  Marginal  approach  involved  also  a  recan- 
tation of  Ricardian  rents,  and  that  proved  to  satisfy 
more  standards  than  those  of  the  marginal  laborer.     It 

"Tbidom,  Book  III,  ch.  10. 

*'  Page  098.  Sop  also  Wicsor,  F.  von,  Ursprung  und  Ilauptgesetze  des 
Wirtschaftlichen  Worthes,  p.  177. 


MARGINISM  309 

was  shown  by  Marginists  from  Wieser  to  Schumpeter 
that  Ricardo's  exclusion  of  rent  from  price  was  illogical 
unless  applied  also  to  the  other  three  shares,  and  that  in 
any  case  it  led  to  absurdities.  Differential  products  were 
granted  to  exist.  The  reality  of  diminishing  returns  of 
things  was  likewise  acknowledged.  But  in  the  first  place 
the  law  of  proportionality  did  away  with  specific  physical 
productivities,  replacing  them  by  values,  and  in  the  second 
place  rentals  became  attributes  of  each  and  all  living 
producers,  so  that  land,  besides  figuring  as  a  special  kind 
of  capital,  lost  its  distinctiveness.  "The  rents  of  all  the 
agents  of  production  constitute,  when  society  is  in  a 
natural  static  condition,  the  entire  supply  of  goods ;  and 
the  supply  that  is  furnished  by  any  one  of  them — or  in 
other  words  the  concrete  rent  of  it — is  of  course  one  of 
the  value-determining  elements."  ^^  Rent  ceased  to  be 
the  indication  of  nature's  stinginess.  Instead  we  are 
informed:  "The  origin  and  the  existence  of  rent  is  de- 
pendent on  the  operation  of  the  law  of  proportionality"  *^ 
— which  governs  all  acts  of  production.  Rent  was  a  part 
of  the  price  of  goods  because  of  the  diversity  of  uses  to 
which  land  might  be  put,  and  because  of  the  possible  loss 
of  better  alternate  returns  either  in  fruits  of  the  earth 
or  in  hire-money.*^  Rent  too  was  fixed  by  margins ;  only 
they  were  of  two  kinds,  referring  now  to  static,  now  to 
dynamic  views  of  economy. 

Confusion  on  this  point  was  not  necessary,  and  indeed 
differential  measurements  were  coupled  with  opportunity 
losses,  in  that  lands  always  bore  some  rent, — but  ab- 
straction of  the  Marginal  sort  here  as  in  the  case  of  in- 
terest led  far  away  from  Utilitarian  ideas.     Some  Mar- 

"  Clark,  J.  B.     Distribution  of  Wealth,  p.  356. 
"  Fetter,  F.  A.     Economic  Principles,   vol.   1,  p.   163. 
"  See  for  Instance  Wie.'^er,  Natural  Value,  Book  5,  ch.  12,  and  Schum- 
peter, J.,  Wesen  und  Hauptinhalt,  p.  380. 


310     THE  DEVELOPMENT  OF  ECONOMICS 

ginists,  for  instance,  excluded  interest  from  their  analysis 
on  the  ground  that  it  was  not  a  static  phenomenon  at 
all,  a  notion  that  had  long  been  applied  to  profits  in  so 
far  as  they  were  not  assimilable  to  wages  of  management. 
On  the  other  hand,  where  interest  was  made  part  of  the 
distribution  opinion  was  divided  on  the  relative  import- 
ance of  productivity  and  of  impatience,  i.  e.,  the  pref- 
erence of  present  over  future  goods.  In  both  cases  a 
uniform  rate  of  interest  was  thought  of,  and  the  loan- 
fund  somehow  implied  to  be  identical  with,  or  to  stand 
in  a  definite  ratio  to,  the  existent  fund  of  capital  goods ; 
but  in  emphasis  discussions  varied  considerably. 

Jevons,  himself,  had  argued  for  a  productivity  theory 
of  interest  without  going  into  the  refinements  of  later 
writers.  He  believed  that  "the  interest  of  capital  is 
the  rate  of  increase  of  the  produce  divided  by  the  whole 
produce."  ^^  This  would  be  so  even  "apart  from  the 
question  of  time,'*  ^^  since  the  "rate  of  interest  depends 
on  the  advantage  of  the  last  increment  of  capital.  .  .  ."  ^^ 
Wieser  supported  this  contention  in  his  *'Natural 
Value"  ^^  with  much  ardor;  but  in  opposition  to  him  his 
compatriot  Boehm-Bawerk  wrote:  "So  long  as  the  wants 
of  spiritual  beings  call  for  fuller  and  finer  satisfactions, 
and  so  long  as  the  working  life  rises  to  higher  levels,  so 
long  will  there  be  a  premium  put  on  the  present  wealth 
which  makes  more  ample  Avealth  possible."  ^^  "It  is 
because  the  stock  of  present  goods  is  always  too  low 
that  the  conjuncture  for  their  exchange  against  future 
goods  is  always  favorable."  ^^  Or  to  bring  out  another 
aspect:  "Interest  will  be  high  in  proportion  as  the  na- 

"  Theory  of  Political  Economy,  1879,  ch.  7. 

"» Ibidem,  p.  248. 

6'  Ibidem,  p.  255. 

"  Bool<s  III  and  IV. 

"  Positive  Theory  of  Capital,  transl.  by  Smart,  W.,  p.  ivi. 

"  Page  359. 


MARGINISM  311 

tional  subsistence  fund  is  low,  as  the  number  of  laborers 
employed  by  the  same  is  great,  and  as  the  surplus  returns 
connected  with  any  further  extension  of  the  production 
period  continue  high,  and  vice  versa."  ^'^ 

Impatience  thus  was  selected  by  Bochm-Bawerk  and  by 
many  later  Marginists  as  the  decisive  element  in  the 
situation.  The  technical  superiority  of  capitalistic 
methods  was  not  overlooked,  but  in  the  endeavor  to  distin- 
guish between  things  and  values,  and  under  the  influence 
of  psychological  premises,  the  personal  equation  seemed 
the  most  attractive.  In  the  words  of  an  American  writer : 
"In  the  general  causation  of  distribution  .  .  .  the  central 
role  is  played  by  the  individual  rate  of  preference  for 
present  over  future  income  which  ...  is  the  subjective 
prototj'pe  of  the  rate  of  interest.  The  study  of  the  theory 
of  interest  therefore  lays  the  foundation  for  a  study  of 
the  theory  of  distribution'*;^^  and  the  interest-rate  itself 
is  the  "excess  above  unity  of  the  rate  of  exchange  between 
the  values  of  future  and  present  goods  taken  in  relation 
to  the  time  interval  between  the  two  sets  of  goods."  ^"^ 

Tt/o  observations  however  may,  by  way  of  conclusion, 
be  offered  on  this  emphasis  of  the  want-side  of  values. 
Namel}^  in  the  first  place,  the  productivity-theory  of  in- 
terest could  explain  a  supposed  uniformity  of  rates  while 
the  agio-theory  could  not,  or  at  any  rate  not  so  directly. 
For  the  productivity  standard  in  general  left  this  clean- 
cut  analysis  of  distribution:  It  premised  the  mobility 
respectively  interconvertibility  of  labor  and  capital,  and 
therefore  fixed  wages  and  interest  at  the  margin.  Neither 
laborer  nor  lender  could  get  more  than  the  contribution 
made  by  least  effective  uses,  since  any  other  unit  of  their 
kind  of  help  was  equally  available  with  their  own.     Only 

"  Page  401. 

"  Fither,  I.     The  Rate  of  Interest,  1907,  p.  234. 

"  Ibidem,  p.  340. 


312    THE  DEVELOPMENT  OF  ECONOMICS 

the  landlord  could  keep  the  supra-marginal  product 
permanently,  though  enterprisers  might  for  a  while,  until 
competition  had  leveled  their  temporary  differential  prof- 
its to  that  of  the  average  producer.  Capital  and  labor 
hence  left  a  consumer's  surplus,  except  that  part  of 
capital's  supra-marginal  product  would  be  absorbed  by 
the  enterpriser.  Rent  was  a  strain  on  consumer's  sur- 
plus and  profits  also  when  rising  far  in  excess  of  wages- 
of-management.^^ 

In  the  second  place,  the  agio-theory  left  open  the  ques- 
tion as  to  what  determined  preference-rates ;  and  though 
this  might  be  dismissed  as  something  not  within  the  scope 
of  Marginal  economics,  as  a  matter  of  fact  opinions 
differed.  Impatience  as  an  attitude  of  mind  of  sociologi- 
cal origins  was  plainly  as  much  a  factor  for  economic 
inquiry  as  many  other  topics  embodied  in  economic 
treatises.  So  one  is  reminded  here,  as  Table  Four  will 
serve  to  illustrate,  of  the  very  general  disregard  of  the 
exact  bounds  set  to  economics  by  the  logicians.**^  We 
find  that  some  subjects  of  interest  to  economics  were 
debarred,  while  others  equally  irrelevant  from  a  logical 
standpoint  were  admitted,  not  so  much  to  complete  a 
•scientific  survey,  as  to  satisfy  a  vague  notion  that  eco- 
nomics should  become  practical  even  when  theory  had 
nothhig  to  say.  Both  Utilitarian  and  Marginal  treatises 
thus  contained  much  material  not  adaptable  to  the  kind 
of  schematization  prescribed  by  methodology  or  premises. 
Current  problems  of  interest  to  the  thinking  man  every- 
where were  put  under  the  rubric  "Applied  Economics," 
with    the    implication    that    the    preceding    analysis    had 

"  For  a  lucid  statement  of  the  productivity  view  of  interest  and  of  its 
bearing  on  Distribution  see  Taussig,  F.  W.,  Principles  of  Economics,  1911, 
vol.  II,  Book  5.  Contrast  this  with  Davenport's  critique  la  his  Economics 
of  Enterprise,  chs.  18-20. 

"  Philippovich,  10.  von.  In  his  Grundriss  der  Politischen  Okonomle,  9. 
edit.,  devotes  to  discussions  of  theory  somewhat  over  25  per  cent,  of  bis 
three-volume  work. 


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314    THE  DEVELOPMENT  OF  ECONOMICS 

something  definite  to  offer  for  their  solution.  Whether 
this  was  actually  so  or  not,  was  not  usually  important, 
for  on  all  sides  the  abstruse  character  of  theory  Avas 
felt  to  be  a  weakness.  It  was  agreed  that  applications 
should  be  made,  or  perhaps  that  economics  as  a  science 
could  not  take  care  of  all  things  economic.  In  either 
case  Marginists  were  bound  to  reach  out  beyond  the 
limits  of  their  Logic. 


CHAPTER  NINE 
CONCLUSION 

If  we  ask  now,  at  the  end  of  our  historical  sketch,  what 
were  the  outstanding  features  in  the  growth  of  economics 
as  a  science,  the  answer  will  of  course  vary  according  to 
the  selection  of  materials,  and  our  personal  bias.  As 
stated  at  the  beginning  of  this  survey,  historical  interpre- 
tations cannot  be  taken  to  read  the  same  way  for  all 
people,  regardless  of  times.  The  genetic  viewpoint  is 
useful  not  because  it  gives  truths  immutable  with  respect 
to  the  data  considered,  even  though  they  lie  in  the  distant 
past,  but  because  for  the  time  and  purpose  necessarily 
guiding  our  valuations  it  serves  to  connect  past  and 
future,  and  more  especially  also  to  disclose  lines  of 
change — or  if  we  prefer,  of  development — that  otherwise 
would  probably  have  escaped  our  notice. 

A  definitive  judgment  therefore  can  never  be  passed 
upon  things  either  now  occurring  or  already  of  the  past. 
But  on  the  other  hand  distance  does  give  perspective,  and 
so  provides  a  setting  for  particulars  that  must  satisfy 
far  more  than  the  impression  gained  close  at  hand.  In 
this  respect  history  is  like  a  picture  which  we  wish  to 
study.  If  we  step  up  too  close  it  loses  meaning,  and 
perhaps  becomes  a  mere  blotch  of  pigments.  We  see 
nothing  of  the  painter's  idea  and  art.  The  canvas  will 
look  like  the  palette  itself  on  which  mixtures  and  shades 
of  color  have  been  tried  out  in  grotesque  variegation. 
But  if  we  move  away  a  bit  our  impression  is   changed. 

315 


316    THE  DEVELOPMENT  OF  ECONOMICS 

By  degrees,  as  we  continue  stepping  back,  the  splotches 
assume  position  and  purpose.  Objects  are  definitely 
recognized.  Foreground  and  background  are  separated 
to  make  room  for  details  which  combine  to  present  an  at- 
tractive whole.  We  read  into  the  picture  certain  mean- 
ings, guided  by  the  usual  experiences  of  our  sense  and 
mind.  Perspective  is  gained,  we  say;  that  is,  apprecia- 
tions are  possible  now  because  on  the  plane  before  us 
things  appear  in  the  relations  in  which  we  find  them  in 
the  outside  world.  Truth  and  fidelity,  accuracy  and 
beauty  thus  are  revealed.  We  sense  as  correct  and  sig- 
nificant what  at  too  close  range  seemed  nonsensical. 

So  it  is  with  the  events  of  the  past.  If  we  stand  too 
near  to  them  they  cannot  mean  much  to  us,  or  at  any 
rate  they  will  not  convey  the  ideas  gathered  by  standing 
farther  away.  Contemporary  happenings  for  this  reason 
are  personalized,  as  though  each  could  do  as  he  pleased, 
or  as  though  each  was  directly  moved  by  another's  com- 
mands. The  will-aspect  of  life  is  uppermost  in  our  minds. 
We  speak  of  motives  and  policies  and  the  power  of  office 
and  of  individuals.  We  enter  into  the  game  as  if  it  were 
of  a  moment's  planning,  a  mere  show  that  could  stop  when 
we  demanded,  and  whose  antecedents  are  of  but  a  moment's 
plotting.  We  simplify  social  processes  by  taking  a 
snap-shot  picture  of  them,  just  as  a  photograph  tells  us 
something  of  a  man's  appearance,  but  not  all,  nor  how 
the  features  came  to  be  what  they  are,  nor  in  what  way 
they  might  consequently  be  expected  to  change  later. 
Excessive  proximity  obstructs  our  view  as  truly  as  blind- 
ness shuts  us  off  from  it  altogether! 

As  regards  the  history  of  economics,  however,  we  are 
now  sufficiently  removed  from  a  great  deal  of  it  to  be  en- 
titled to  some  sort  of  opinion,  even  if  later  estimates  will 
have  possibly  a  still  greater  value.      What  the  founders 


CONCLUSION  317 

of  economics  had  in  mind  was  evidently,  in  the  first  place, 
an  extension  of  law  from  the  realm  of  physics  to  that  of 
psychics.  This  is  a  fundamental  that  can  never  be  over- 
emphasized. It  was  the  fondest  wish  of  the  Naturalists 
to  test  out  the  propositions  advanced  by  physics  and 
astronomy,  to  find  out  whether  human  nature  was  rad- 
ically different  from  the  physical  world,  or  whether  a 
rationale  of  meliorism  could  be  discovered  that  might 
mean  to  legislators  what  applied  natural  science  and 
mathematics  had  even  then  come  to  mean  for  producers 
of  wealth. 

The  astonishing  growth  of  natural  science  after  the 
Renaissance  exercised  an  abiding  influence  upon  specu- 
lators in  England  and  on  the  continent.  It  was  felt 
that  a  great  question  had  really  been  raised,  the  answer 
to  which  must  sooner  or  later  be  essayed.  In  the  wake 
of  the  discoveries  made  by  men  like  Kepler,  Galileo,  Har- 
vey, Newton  and  so  on,  followed  logically  a  group  of 
thinkers  who  endeavored  two  principal  things,  first,  to 
unify  the  new  knowledge  accumulated  by  science  so  as 
to  restate  the  problems  of  antiquity,  and  secondly  to 
span  the  gulf  between  physics  and  psychics.  It  was 
asked,  what  is  the  difference  between  the  two  that  makes 
their  linkage  impossible?  It  was  asked,  why  must  we 
assume  one  set  of  laws  for  the  outside  world,  and  an- 
other for  the  inner  without  contradicting  not  merely 
Gospel  and  dogma,  but  also  our  reasoning  in  each  of  the 
two  fields.?  And  the  reply  was:  The  difference  is  not 
as  great  as  it  seems  to  be.  A  monistic  conception  is  the 
best,  all  things  considered.  Eventually  the  whole  realm 
of  reality  and  of  knowledge  will  have  to  be  bounded  by 
a  single  law,  though  to  metaphysicians  spirit  and  matter 
might    mean    two    categorically    different    spheres,    each 


318     THE  DEVELOPMENT  OF  ECONOMICS 

a  particular  kind  of  truth,  and  the  former  ultimately 
the  basis  for  all  else. 

Social  science  thus  arose  as  the  result  of  an  outlook 
that  has  fought  with  the  dualistic  and  transcendental  for 
supremacy  ever  since.  It  is  best  understood  as  a  pro- 
test against  an  older  theology  and  metaphysics.  For 
all  questions  of  human  thought,  feeling,  and  behavior 
had  been  for  centuries  resolved  into  definitions  of  dogma, 
ethics  and  politics  receiving  their  stamp  from  this  pos- 
tulate. But  after  the  Reformation  theology  was  re- 
stricted to  a  smaller  sphere  of  jurisdiction,  and  as  for 
the  professional  philosopher,  he  was  not  able  in  the  long 
run  to  assert  his  authority,  not  even  such  masters  as 
Descartes,  Leibniz,  Spinoza,  Kant  and  their  disciples. 
So  it  came  about  that  psychology  developed  fastest  in 
the  home  of  empiricism,  where  moralists  and  students  of 
social  relations  sought  the  solution  of  their  problems  in 
an  intimate,  first-hand  study  of  human  nature.  The 
larger  aspects  of  their  work  were  forgotten  or  deliber- 
ately laid  aside  in  the  hope  of  an  answer  to  the  less  ab- 
struse question  whether  the  methods  of  natural  science 
eould  render  valuable  aid,  whether  laws  might  be  estab- 
lished such  as  could  compare  favorably  with  the  New- 
tonian. 

And  the  verdict,  as  stated,  was  in  the  affirmative.  It 
could  scarcely  be  otherwise.  Stoic  speculations  and  the 
example  of  natural  science  led  men  to  expect  notable  re- 
sults from  their  search.  The  Newtonian  world  was 
widely  believed  to  have  a  counterpart  in  tlie  realm  of 
psychic  phenomena.  Mechanism  and  motion  were  to  in- 
here in  all  tilings,  to  govern  tilings  and  thoughts  alike. 
Forces  everywhere ;  disequilibrium  alternating  with  equi- 
librium. This  was  at  the  basis  of  eighteenth  century 
thinking;  in  terms  expressive  of  this  viewpoint  the  best 


CONCLUSION  319 

works  wore  written,  Hume,  for  instance,  applying  the 
experimental  method  to  psychology;  others  believing  in 
a  material  origin  of  immaterial  facts ;  Comte  expounding 
a  social  physics  that  should  be  for  the  moral  inquiries 
what  Newton  was  to  the  physical;  while  Quesnay  had 
pictured  wealth  in  circulation,  just  as  blood  coursed  in 
the  human  body.  Not  mere  metaphors  these,  but  anal- 
ogies held  to  be  real ! 

If  Physiocratism  failed  we  must  attribute  it  partly 
to  a  dryness  of  presentation  suitable  only  for  erudites,  but 
partly  also  to  a  rapidly  changing  economic  order  that 
had  little  in  common  with  the  life  of  the  Physiocrats 
themselves.  Thus,  for  several  reasons  the  lead  of  the 
French  passed  over  to  England  where  accumulations  of 
literature  as  well  as  the  outward  circumstances  provided 
a  fertile  field  for  economists.  Constitutional  liberties, 
personal  safety,  the  downfall  of  the  guild  system,  and 
exceedingly  advanced  ideas  on  economic  organization, — 
here  we  have  factors  that  could  not  but  encourage  men 
of  ability.  Smith  had  a  comparatively  easy  road  because 
the  individualistic  system  first  espoused  by  Frenchmen 
was  nicely  attuned  to  the  opportunities  of  a  people  on 
the  eve  of  a  great  industrial  revolution.  Business-men 
could  not  but  take  kindly  to  a  doctrine  which  bade  them 
go  full-steam  ahead,  with  the  intimation  that  the  race 
ought  to  belong  to  the  s\vift. 

Nonetheless  there  was,  as  we  have  seen,  the  idea  of 
law  regulating  individual  actions  as  it  governed  the  in- 
teractions of  matter.  The  principles  of  physics  that 
Hobbes,  Locke,  and  Hume  had  discovered  first  in  the 
workings  of  individual  consciousness,  were  gradually 
transferred  to  the  social  field.  Witli  the  Physiocrats  the 
emphasis,  to  be  sure,  had  been  on  the  physical  side  of 
the    human    constitution,    but    Smith    and    later    writers 


320     THE  DEVELOPMENT  OF  ECONOMICS 

paid  attention  increasingly  to  the  psychological  aspects. 
It  was  psychology  that  Smith  and  the  Utilitarians  first 
read  into  economic  happenings.  It  was  with  the  under- 
standing that  human  nature  was  in  its  essentials  known, 
that  it  was  substantially  fixed  and  uniform,  that  the 
instincts  were  few  and  all-powerful,  though  exploited  by 
reason  as  man  grew  up, — it  was  this  conception  that 
gave  to  economics  a  basis  for  exact  measurements,  for 
nicety  of  delimitation  of  duties  assigned,  for  definitions 
and  laws  that — it  was  held — could  stand  worthily  along- 
side of  the  inductions  of  natural  science. 

In  Adam  Smith's  writings  economics  was  still  under  the 
tutelage  of  Christian  dogma.  Providence  played  a  con- 
spicuous part,  and  ethics  was  in  reality  as  strongly  Bib- 
lical as  it  pretended  to  be  secular.  Hence  sympathy  won 
over  egoism.  Hence  Laissez  Faire  was  a  conclusion  from 
facts,  not  a  prejudgment  as  later  it  seemed  to  be.  How- 
ever, in  Utilitarianism  the  a-moral  and  agnostic  concept 
carried  the  day.  Psychology  supplanted  what  had  been 
left  of  theology.  Sensationalism  was  everything,  literally. 
Ideas  now  counted,  not  things.  If  the  Physiocrats  had 
dwelled  long  on  goods  in  the  concrete,  the  Ricardian  fol- 
lowers now  pointed  again  and  again  to  values.  And 
values  related  to  facts  of  consciousness.  It  was  in  a  way 
curious  that  with  all  this  revolving  about  sensations  the 
Benthamites  did  not  al)andon  at  once  their  objective 
norms  of  value-measurement.  However,  they  did  not. 
They  stuck  to  tangible  things  no  less  than  to  psychics, 
until  a  later  group  of  economists  showed  tlie  inconsistency 
of  such  procedure. 

For  the  time  being  then  the  sensational  psychology 
reigned  omnipotently.  Ethics  and  economics  were  mar- 
vellously schematized.  Sensations,  ideas,  feelings,  asso- 
ciations of  inner  reactions,  and  composition  of  thoughts 


CONCLUSION  321 

and  emotions — such  were  the  crucial  facts  as  the 
pioneers  of  economics  saw  them.  To  know  how  a  social 
science  could  exist  one  had  only  to  demonstrate  the  in- 
teraction between  individual  minds  according  to  the  laws 
just  mentioned.  The  physical  environment  was  for  each 
and  all  the  same;  the  result  of  dual  interactions  meas- 
urable in  precisely  the  same  manner  that  one  might  ac- 
count for  chains  of  ideas  in  any  one  person.  John 
Stuart  Mill  was  not  alone  in  proclaiming  this  principle; 
only,  he  was  most  explicit  and  logical  in  delineating 
the  scheme  whereby  economics  could  be  divorced  from 
sociology.     Hence  the  concept  of  an  "economic  man." 

It  was,  from  tliis  standpoint,  also  a  notable  gain  that 
the  logical  problem  should  be  given  an  entirely  new  as- 
pect ;  that  medieval  deduction  should  be  replaced  by  de- 
ductive natural  science,  or  on  the  other  side  by  induction 
as  it  had  long  been  urged  by  prophets  in  the  field.  Eco- 
nomics therefore  served  as  a  proving  ground  for  a  new 
weapon  that  natural  scientists  could  not  furnish.  It 
was  argued  that,  given  certain  laws  of  mind  and  emo- 
tion, economics  was  bound  to  go  about  its  work  just  as 
mathematics  did,  though  a  verification  might  and  should 
be  attempted  whenever  the  nature  of  the  problem  allowed. 
The  calculation  of  values  necessitated  such  a  stand,  and 
in  the  hope  of  being  exact  the  predominance  of  economic 
motives  was  predicated  as  a  basis  for  detaching  a  general 
social  and  ethical  science  from  that  of  Adam  Smith. 
Averages  consequently  played  no  part  in  Utilitarian  eco- 
nomics, though  a  dynamic  view  like  that  of  Historism 
could  logically  resort  to  it  for  important  conclusions. 
And  what  is  more,  for  similar  reasons  economics  at  no 
time  relied  excessively  upon  either  statistics  or  experi- 
mentation ;  for  the  one  was  unnecessary  if  eighteenth 
century  psychology  was  correct,  and  the  other  was  con- 


322     THE  DEVELOPMENT  OF  ECONOMICS 

ceded  to  be  impracticable  except  on  minor  occasions.  So 
economics  continued  to  be  a  deductive  discipline  with 
claims  to  precision  bom  ultimately  of  sensationalism,  but 
attributed  immediately  to  abstractions  which  could  be 
rectified  in  the  light  of  particulars  when  it  was  so  desired. 
What  else  could  happen  under  those  circumstances? 
Plainly  economics  was  playing  with  concepts,  as  well  as 
studying  the  concrete. 

Furthermore,  the  breach  between  the  original  and  the 
later  Utilitarian  and  Marginal  economics  was  widened  by 
a  shifting  of  emphasis  that  was  truly  startling.  Smith 
had  dealt  with  prosperity,  production,  stuffs  in  circula- 
tion, surplus  of  stuffs  and  their  ratios ;  but  afterwards 
we  hear  much  of  pleasure,  price,  values  distributed  as 
rights  to  goods,  and  of  capital  as  a  fund.  Rights  rather 
than  ratios  are  involved.  To  the  hedonistic  premises 
are  added  legal  presuppositions  without  which  economics 
has  no  existence.  Freedom  of  contract  and  competition 
thus  became  essentials  in  the  scheme,  even  if  perhaps 
historically  of  a  particular  time  and  place.  The  whole 
valuation  and  pricing  process  is  built  on  differentials  of 
purchasing-power,  opportunity,  and  personal  aptitude. 
The  strong  set  up  standards  of  productiveness  for  the 
weak.  To  produce  is  to  render  services  whose  value  is 
individualized  as  never  before. 

Utilitarian  economics  attacked  the  price  problem  by 
comparing  time  and  labor  units.  At  the  outset  it  was 
hoped  that  time  might  be  an  equivalent  for  productive- 
ness ;  but  later  on  labor  itself  was  referred  to  products, 
so  that  socialism  stood  alone  in  its  objective  explana- 
tion of  wealth.  The  idea  of  measuring  expenditure  of 
energies  never  found  many  friends.  Hence,  when  the 
time-element  too  was  discarded,  prices  ceased  to  be  ac- 
counted   for    on    non-competitive    principles.      What    re- 


CONCLUSION  323 

mained  was  a  summation  of  expenses  according  to  entre- 
preneur norms,  and  this  indeed  turned  out  to  be  the  usual 
method  of  computation.  Differential  productivity  of 
stuffs  had  a  place  only  in  agriculture  or  industry  be- 
cause production  was  separated  from  value  and  distri- 
bution. 

Marginism  was  therefore  consistent  in  denying  from 
the  start  the  possibility  of  explaining  prices  as  had 
been  understood  once  upon  a  time.  The  conclusion 
reached  by  the  second  quarter  of  the  century,  viz.,  that 
price  analysis  involves  equations  rather  than  specific 
causation  found  favor  also  with  the  founders  of  Mar- 
ginism. Only,  they  put  differential  want  and  rates  of 
preferences  in  place  of  differential  objective  productiv- 
it_y.  The  equation  which  now  served  to  determine  ratios 
of  exchange  for  either  goods  or  services  dealt  not  with 
time  or  energy  or  stuffs,  but  with  pain  and  pleasure,  with 
feelings  and  wishes  and  utilities.  Eighteenth  century 
psychology  again  proved  fundamental  in  that  it  pro- 
vided the  standards  by  which  purchases  were  to  become 
rational.  For  sensations  are  supposedly  back  of  ideas, 
and  ideas  back  of  feelings  ;  and  feelings  are  made  synony- 
mous with  emotions ;  and  memory  and  association  step  in 
to  arouse  and  re-arouse  former  ideas  and  feelings ;  and 
anticipations  of  pleasure  have  the  effect  of  realization 
itself;  and  intensities  of  feeling  or  ideas  arc  measured  by 
last  increments  which  indeed  are  the  most  cliaracteristic 
feature  of  Marginism.  Thus  want  and  value  not  only 
were  proportionate  to  sense  impression  and  feelings,  but 
in  addition  they  unfailingly  resulted  in  deeds  of  ex- 
change, so  that  price  became  tlie  last  link  in  a  long 
cliain  of  psychological  facts  skillfully  maneuvered  for  a 
definite  purpose.  There  was  nothing  else  to  be  done  in 
the  matter,  unless  people  gave  up  the  connection  between 


324     THE  DEVELOPMENT  OF  ECONOMICS 

psychics  and  prices  altogether,  in  which  case,  as  some 
grudgingly  admitted,  a  vicious  circle  was  avoided  at  the 
cost  of  the  analysis  itself.  What  then  was  left  was  a 
balancing  of  pecuniary  valuations  in  the  open  market, 
the  net  result  being  once  more  equations  of  prices,  but 
traced  to  differential  purchasing-powers  rather  than  to 
differential  want  intensities.  Hence  Marginism  would 
have  renounced  its  original  intents. 

The  Historical  movement  was  preeminently  a  protest 
against  the  Utilitarian  interpretation  of  Adam  Smith, 
but  as  events  showed,  there  was  good  reason  why  it  should 
also  disagree  with  the  Marginists  who  were  the  logical 
successors  of  Utilitarianism.  So,  while  Historism  was 
but  an  episode  in  the  larger  performance,  and  withal  a 
piece  of  extravaganza  that  many  thought  not  worth  while, 
it  had  nevertheless  a  mission  to  fulfill.  It  made  econo- 
mists think  by  bringing  out  contrasts  that  might  other- 
wise have  been  overlooked.  It  took  exception  to  one 
philosophy,  and  propounded  another.  It  put  on  the  debit 
side:  The  individual,  statics,  instincts,  earnings,  the  en- 
trepreneur, and  a  time-honored  absolutistic  ethics ;  while 
at  the  right  side  of  the  line  it  put:  Social  norms  of  wel- 
fare, dynamics,  a  stress  of  learning  and  self-control, 
ideals  of  consumption,  state  interference,  and  withal  a 
new  sort  of  morality  that  is  pagan  rather  than  Christian 
in  the  accepted  sense. 

That  is,  the  friends  of  Historism  had  done  away  with 
rampant  individualism  as  espoused  by  the  founders  of 
economics.  They  saw  no  good  in  the  static  abstractions 
that  detached  economic  activities  from  social  processes 
as  a  whole.  To  them  these  latter  constituted  a  single 
irreducible  unit.  To  them  hedonism  was  an  inadequate 
way  of  appraising  human  nature  and  social  history,  be- 
cause it  exaggerated  egoism  and  underestimated  the  force 


CONCLUSION  826 

of  post-natal  experiences.  It  was  granted  that  congen- 
ital traits  must  count.  But  it  was  also  pointed  out  that 
the  inherent  good  in  man  needed  only  a  right  stimulus 
to  suppress  proclivities  for  sordid  pleasure.  Hence,  what 
Smith  had  deemed  a  task  in  part  fulfilled  by  Providence, 
and  for  the  rest  a  natural  expression  in  an  age-long  evo- 
lution of  mankind,  the  Historians  hoped  to  accomplish 
by  a  direct  and  systematic  control  of  individual  actions. 
Social  heredity,  since  it  surrounded  man  from  birth  to 
death,  was  to  lead  him  under  proper  surveillance  into 
right  channels  of  thought  and  conduct. 

Accordingly  individual  and  social  interests  were  not 
considered  as  necessarily  indentical  at  all  vital  points. 
What  a  man  desired  might  be  good  enough,  but  what 
he  achieved  might  do  harm.  Furthermore,  what  a  man 
earned  could  not  matter  as  much  as  what  he  produced, 
and  how  he  produced  it.  An  uncompromising  business 
viewpoint  was  avoided  as  possibly  damaging  to  public 
welfare.  What  was  needed,  we  are  told  again  and 
again,  is  a  socializing  of  religion,  a  substitution  of  prac- 
ticable aims  here  on  earth  for  fancies  nowhere  realizable. 
Hence  it  is  not  surprising  perhaps  that  German  econo- 
mists, even  when  not  strictly  of  the  Historical  School, 
had  great  faith  in  state  regulations  and  purposely  wid- 
ened the  field  of  economics  in  one  sense  while  narrowing 
it  elsewhere ;  including  programs  and  aspects  looked 
askance  at  by  orthodox  writers,  but  emphasizing  a  na- 
tionalistic end  whose  pragmatic  tests  endangered  one  of 
the  most  fundamental  rules  of  pure  science. 

However,  it  must  also  be  admitted  that  traditional 
orthodox  economics  has  recently  been  criticized  from 
within.  Not  only  outsiders  have  passed  slighting  re- 
marks, but  increasingly  economists  of  the  profession,  even 
when  in  the  main  Utilitarian   or  Marginal,   have  taken 


326     THE  DEVELOPMENT  OF  ECONOMICS 

occasion  to  demur  to  points  of  doctrine.  A  ferment  has 
been  noticeable  in  the  last  few  decades  which  bodes  ill  for 
the  old-time  system.  New  ideas  have  been  broached,  and 
new  ends  are  diligently  sought. 

Thus,  for  one  thing,  our  concept  of  human  nature  has 
materially  changed.  Its  simplicity  from  either  the  psy- 
chological or  biological  standpoint  is  being  questioned, 
and  the  difficulty  of  untangling  its  numerous  factors 
reluctantly  conceded.  We  know  more  now  of  laws  of 
heredity  and  variation,  but  have  at  the  same  time  found 
the  question  of  instincts  and  the  passions  to  be  as  vex- 
ing as  ever.  Investigators  have  come  to  stress  the  plas- 
ticity of  innate  traits  and  predispositions,  and  to  rely 
more  upon  education  in  many  phases. 

How  men  value  things,  and  how  price  takes  the  place 
of  personal  wants,  this  problem  has  gained  renewed  inter- 
est. The  force  of  legal  institutions  is  no  longer  disre- 
garded in  analyzing  demand.  And  what  is  more  impor- 
tant, the  central  theme  has  gradually  been  impugned  as 
being  an  error  of  judgment.  Some  would  minimize  Price 
and  Distribution  and  pass  over  to  a  more  careful  consid- 
eration of  Consumption  and  Control. 
.  But  however  that  may  be,  it  will  further  be  agreed  that 
the  logic  and  methodology  of  social  science  is  itself  under- 
going a  revision  of  no  trifling  sort.  What  is  reasoning 
and  what  the  relation  between  induction  and  deduction, 
what  really  should  be  meant  by  causation  and  how  our 
answer  bears  on  a  selection  of  fields  for  inquiry,  to  what 
extent  measurements  may  be  undertaken  and  whither  laws 
so  arrived  at  may  lead  to  in  their  practical  uses,  how 
static  concepts  and  statistical  methods  may  together  fur- 
nish an  instrument  of  discoveries — all  these  queries  are 
tending  to  reappear  in  new  guise  and  ^\^th  a  new  meaning. 

The  old  mechanistic  psychology  is  passing  away.     Some 


CONCLUSION  327 

would  remark  that  it  has  long  passed  away.  What  mind 
is  and  how  human  will  labors  to  produce  history  is  a 
topic  for  examination  with  appliances  not  formerly 
known.  Consequently,  too,  our  view  of  what  morality 
is  and  of  what  ethics  depends  on  for  its  conclusions  is 
being  altered  by  degrees.  Eventually,  no  doubt,  new 
norms  of  prosperity  will  be  contrasted  with  the  ancient 
absolutistic  ones.  To  government  will  be  assigned  more 
onerous  duties  than  have  been  given  to  it  formerly.  A 
changed  economic  environment  is  bidding  students  to  pre- 
pare for  recantations  and  research.  Marginism,  there- 
fore, cannot  be  held  to  reign  unchallenged,  much  less 
to  have  brought  the  development  of  economics  to  a  close. 
Heretofore  economics  belonged  essentially  to  Europe. 
It  was  in  France  that  the  science  had  its  inception,  and 
in  England  that  it  reached  its  highest  development  along 
lines  suggested  by  the  author  of  "The  Wealth  of  Na- 
tions." Throughout  the  entire  course  of  its  growth  eco- 
nomics must  be  granted  to  have  found  eminent  leaders 
on  British  soil.  There  method  and  principles  were  stud- 
ied most  carefully,  and  in  an  original  manner;  there  the 
practical  aspects  engaged  thinkers  and  legislators  more 
seriously  than  perhaps  anywhere  else.  The  historical 
standpoint  was  treated  best  by  the  Germans,  although 
other  nations  had  contributed  something  in  earlier  days. 
The  Austrians  in  the  next  place,  gained  prestige  by  their 
clear  and  complete  exposition  of  the  marginal  principle, 
a  rather  odd  fact  considering  the  Anglo-Saxon  origin 
of  the  psychological  doctrines  at  the  root  of  it.  And 
lastly,  the  United  Stages  laid  Europe  under  obligation 
for  Ideas  essential  to  both  static  and  dynamic  economics, 
the  last  half  century  having  in  this  respect  fulfilled  prom- 
ises made  many  generations  ago  by  philosophers  and 
psychologists  unacquainted  with  a  science  of  economics. 


328     THE  DEVELOPMENT  OF  ECONOMICS 

Whether  hereafter  the  leadership  shall  remain  with  a 
few  countries — not  denying  the  laudable  part  played  by 
Italy  and  minor  nations  of  the  Old  World — no  one  can 
say.  But  it  seems  not  unlikely  that  changed  conditions, 
precipitated  by  the  Great  War,  will  stimulate  additional 
people  to  constructive  thinking.  Civilization  is  no  doubt 
to  be  less  centralized  geographically  from  now  on  than 
it  has  been  so  far.  A  number  of  countries  have  been 
awakened  to  the  western  viewpoint  whose  voice  should 
not  go  unheard  in  the  long  run.  Much  new  material,  and 
new  modes  of  approach,  are  to  be  tried  out  for  partly 
new  purposes,  wherefore  histories  of  thought,  and  of  eco- 
nomic theories  in  particular,  will  very  probably  gain 
rather  than  lose  in  importance. 


A  WORKING  BIBLIOGRAPHY 

INTRODUCTORY  NOTE 

(1)  A  complete  and  thorough  history  of  economics  as  a  science, 
that  would  do  justice  to  all  its  phases  including  particularly  its 
roots  in  philosophy  and  psychology,  has  not  yet  been  written.  It  is 
therefore  not  supposed  that  the  materials  here  listed  will  afford  an 
exhaustive  treatment  of  the  subject,  or  even  cover  all  aspects  in- 
volved. However,  they  are  meant  to  give  a  working  bibliography  for 
a  study  of  many  important  sources,  especially  such  as  are  readily 
available  in  the  United  States,  Further  materials  will  inevitably 
be  encountered  in  the  perusal  of  materials  here  listed,  notably  of 
course  in  scientific  periodicals  and  cyclopedias. 

(2)  The  non-economic  literature  bearing  on  the  development  of 
economics  is  so  important  that  it  seems  expedient  to  include  much 
of  it  even  in  an  introductory  survey.  The  main  line  of  division  (A 
and  B  in  this  bibliography)  between  non-economic  and  economic 
literature  will  therefore  explain  itself.  On  the  other  hand,  the  dis- 
tinction between  works  on  methodology  and  works  on  principles  of 
economics  is  made  chiefly  to  call  attention  to  the  important  role 
that  premises  have  always  played  in  the  exposition  of  economic 
doctrines. 

(3)  Books  and  articles  have  been  selected  on  the  principle  of 
giving  what  is  most  representative  of  a  school  or  outlook,  or  is 
pioneer  labor,  or  was  peculiarly  influential  in  the  history  of  eco- 
nomics. Many  works  of  equal  intrinsic  merit  have  thus  been  ignored 
merely  because  of  the  restriction  in  number. 

(4)  It  cannot  be  emphasized  too  strongly  that  a  careful  student 
must  rely  upon  sources  rather  than  upon  secondary  works  on  his 
subject.  The  study  of  primary  materials  will  give  that  touch  of 
realism  and  of  conviction  that  no  other  authority  can  promise. 
Hence  the  divisions  I  and  II  made  below  under  both  A  and  B. 

(5)  For  the  eighteenth  and  nineteenth  centuries  a  number  of 
doctrinal  works  have  been  given,  classified  by  countries,  because — 
with  very  few  exceptions — individual  treatises  are  not  considered  in 
this  book.  However,  the  footnotes  provide  further  references  of 
value. 

(6)  For  all  source  materials  the  date  of  first  publication  is  given, 
though  in  some  cases  the  dates  of  later  editions  and  of  translations 
have  been  added.  Furthermore,  excepting  American  literature,  which 
has  been  considered  up  to  1910,  the  bibliography  reaches  only  up 
to  1900. 

Finally,  histories  of  economics  best  suited  to  the  needs  of  Ameri- 
can  students   have    been   marked   with    an    asterisk;    but   this    does 

329 


330     THE  DEVELOPMENT  OF  ECONOMICS 

not  make  other  accounts  by  any  means  negligible.  Diligent  reading 
of  both  European  and  American  books  will  yield  fruitful  sug- 
gestions in  abundance. 

A.  NOX-ECONOMIC  LITERATURE.  I— SECONDARY  WORKS 

1.     Histories  of  Philosophy 
a.  General 

Cushman,  H.  E.     A   Beginner's  History  of  Philosophy,  2  vols.,  edit. 

of  1918-19. 
Marvin,  W.  T.     The  History  of  European  Philosophy,  1917. 
Thillv,  F.     A  History  of  Philosophy,  1914. 

Weber,  A.     History  of  Philosophy '(transl.  by  Thilly,  F.),  1896. 
Windelband,  W.     A  History  of  Philosophy  (transl.  by  Tufts,  J.  H.), 

1901,  2.  edit. 

b.  Modern  Philosophy 

Calkins,  Mary  W.     The  Persistent  Problems  of  Philosophy,  4.  edit., 

1917. 
Hoifding,  H.     A  Brief  History  of  Modern  Philosophy    (transl.  by 

Sanders,  Ch.  F.),  1912. 

c.  Greek  Philosophy 
Gomperz,   Th.     Griecliische   Denker    (published   in   English   by   John 
Murray,  London,  1906-12). 

d.  Readings  in  the  Sources 
Rand,  B.     Modern  Classical   Philosophers,   1908;   giving  selection   of 

writers  from  G.  Bruno  to  H.  Spencer. 
Partridge,    G.    E.     A    Reading   Book    in    Modern    Philosophy,    1913; 

covering  the  period   from  Descartes  to  H.   Spencer. 
Bakewell,  Ch.  M.     Source  Book  in  Ancient  Philosophy,  1907;  giving 

excerpts  for  the  period  of  Thales  to  Plotinus. 

2.  Histories  of  Science,  Psychology,  Political  Theories, 
AND  Ethics 

History  of  Science 
Williams,  H.  S.     A  History  of  Science,  4  vols.,  1904.     See  especially 
vol.  II. 

History   of  Psychology 
Klemm,  O.     A  History  of  Psychology  (transl.  by  Wilm,  E.  C),  1914. 
Warren,  H.  C.     A  History  of  the  yVssociation  Psychology,  1921. 

Political  Theories 
Dunning,  W.  A.     A  History  of  Political  Theories,  3  vols.,  1902,  1905, 

1921.     The  second  and  third  volumes  deal  with  modern  times. 
Scherger,  G.  L.     The  Evolution  of  Modern  Liberty,  1904. 
Coker,  F.  W.     Readings  in  Political  Philosophy,  1914. 

History  of  Ethics 
Jodl,  F.     Geschiclite  dcr   Kthik  in  der  Neueren   Philosophie,  2  vols., 
1882-89,  2.  edit.,  1906-12. 


A  WORKING  BIBLIOGRAPHY  331 

Lccky,  W.  E.  H.  A  History  of  the  Rise  and  Influence  of  the  Spirit 
of  Rationalism  in  Europe,  edit,  of  1913. 

Albee,  E.     A  History  of  English  Utilitarianism,  1902. 

Stephen,  L.  The  History  of  English  Thought  in  the  Eighteenth  Cen- 
tury; 3.  edit.,  1902. 

A.     n— SOURCES 

1.  Seventeenth  Century 
Philosophy  and  Psychology 

Descartes,  R.     Discours  de  la  Methode,  1C37,  transl.  into  English  by 

Veitch,  J.,  edit,  of  1897. 
Hobbes,  Th.     Elements   of  Philosophy,   1655    (especially   Part  I)    in 

Molesworth's  edition,  1839-45;   16  vols. 
Locke,  J.     Essay  Concerning  the  Human  Understanding,  1690;  edited 

by  Eraser,  A.  C,  1894. 

Ethics  and  Political  Theories 
Grotius,  H.     De  Jure  Belli  et  Pacis,  1625.     Translated  by  Whewell, 

W„  1853. 
Hobbes,  Th.     Leviathan,  1651. 
Rachel,  S.     On  the  Law  of  Nature  and  Nations,  1676,  English  version 

by  Carnegie  Institution  of  Washington,  D.  C,  1916,  2.  vol. 
Locke,  J.     Two  Treatises  on  Government,  1690;  edited  by  Morley,  H., 

1894. 
Cumberland,  R.     De  Legibus  Naturae,  1672.     English  by  Maxwell,  J., 

1727. 
Cudworth,  R.     The  True  Intellectual  System  of  the  Universe,  1678. 
Shaftesbury,  Third  Earl  of.     Inquiry  Concerning  Virtue  and  Merit, 

1699. 

2.  Eighteenth  Century 

Philosophy  and  Psychology 

Hume,  D.  A  Treatise  of  Human  Nature,  Book  I:  Of  the  Under- 
standing, 1739;  edited  by  Selby-Bigge,  L.  H.,  1896. 

Hartley,  D.  Observations  on  Man,  His  Frame,  His  Duty,  and  His 
Expectations,  2  vols.,  1749. 

Condillac,  E.  B.  de.     Traite  des  Sensations,  1754. 

Holbach,  Baron  P.  H.  D.  von.     Systeme  de  la  Nature,  1770. 

Ethics  and  Political  Theories 
Hutcheson,  F.     Inquiry  into  the  Original  of  Our  Ideas  of  Beauty  and 

Virtue,  1720. 
Hume,  D.     Of  Morals  (Book  III  of  His  Treatise  of  Human  Nature), 

1740.    See  also  the  restatement  of  the  subject  in  his:  An  Inquiry 

Concerning  the  Principles  of  Morals,  1751. 
Smith,  A.     Theory  of  the  Moral  Sentiments,  1759. 
Ferguson,  A.     Institutes  of  Moral  Philosophy,  1767. 
Tucker,  A.     The  Light  of  Nature  Pursued,  1768. 
Paley,  W.     Principles  of  Moral  and  Political  Philosophy,  1785. 
Godwin,  W.     Enquiry  Concerning  Political  Justice  and  Its  Influence 
on  Morals  and  Happiness,  1793. 


332     THE  DEVELOPMENT  OF  ECONOMICS 

Montesquieu.     Esprit  des  Lois,  1748;  transl.  into  English  by  Nugent, 

Th.,  1873,  2  vols. 
Morelly,  Abbe.     Code  de  la  Nature,  1756. 
Rousseau,  J.  J.     Du  Contrat  Social,  1762. 
Bentham,  J.     Fragment  on  Government,  1776. 
Bentham,  J.     Principles  of  Morals  and  Legislation,  1789. 
Selby-Bigge,    L.    A.    British    Moralists    (Selections    from    Sources), 

2  vols.,  1897. 

History  and  Statistics 
Vico,  J.  B.     Principil  della  Scienza  Nuova  d'Intorno  aUa  Commune 

Natura  delle  Nazioni,  1725. 
Voltaire,  F.  M.  A.  de.     Essai  sur  les  Moeurs,  1756. 
Ferguson,  A.     Essay  on  the  History  of  Civil  Society,  1767, 
Herder,  J.  G.  von.    Ideen  zur  Philosophic  der  Geschichte  der  Mensch- 

heit,  1784-91. 
Condorcet,  Marquis  de.     Esquisse  d'un  Tableau  Historique  des  Pro- 

gr^s  de  I'Esprit  Humain,  1794. 
Suessmilch,  J.  P.     Die  Gottliche  Ordnung  in  den  Verhaltnissen  des 

Menschlichen   Geschlechts   aus   der  Geburt,   dem  Tode,   und   der 

Fortpflanzung  desselben,  1741. 

History  of  Statistics 
Meitzen,    A.     Geschichte,   Theorie    und    Technik    der    Statistik,    1886, 
transl.  by  Falkner,  R.  P.,  in  Annals  of  the  American  Academy 
of  Political  and  Social  Science,  1891,  Vol.  I. 

3.  Nineteenth  Centuey 
Philosophy 

Hegel,  G.  W.  F.     Logik,  1817,  in  Encyclopadie  der  Philosophischen 

Wissenschaf ten ;  transl.  by  Wallace,  W.,  second  edit.,  1892. 
Brown,  Th.     Lectures  on  the  Philosophy  of  Mind,  1820. 
Stewart,  D.     Elements  of  Philosophy,  1818-26,  being  the  second  and 

third  volume  of  his  works,  1810-26,  3  vols. 
Herschel,  J.  F.  W.     Preliminary  Discourse  on  the  Study  of  Natural 

Philosophy,  1830. 
Whewell,  W.     Philosophy  of  the   Inductive  Sciences,  founded  upon 

their  History,  2  vols.,  1840. 
Mill,  J.  S.     A  System  of  Logic,  Ratiocinative  and  Inductive,  1843. 
Mill,  J.  S.     Comte  and  Positivism,  1865. 

Mill,  J.  S.     Examination  of  Sir  William  Hamilton's  Philosophy,  1865. 
Jevons,  W.  S.     Principles  of  Science,  1874. 
Wundt,  W.     Logik,  3  vols.,  1881-84,  especially  vol.  II. 
Dilthey,  W.     Einleitung  in  die  Geisteswissenschaften,  1883. 
Windelband,  W.     Geschichte  und  Naturwissenschaft,  1894. 

Psychology  and  Ethics 
Bentham,  J.     A  Table  of  the  Springs  of  Action,  1817. 
Mill,  Jas.     An  Analysis  of  the  Phenomena  of  the  Human  Mind,  1829; 

edited  by  his  son  John  Stuart,  and  others,  1869. 
Bain,  A.     Senses  and  Intellect,  1855. 


A  WORKING  BIBLIOGRAPHY  333 

Fechner,  G.  Th.     Eleniente  der  Psychophysik,  1859. 

Hegel,  G.  W.  F.     Philosophic  des  Rechts,  1820;  transl.  by  Dyde,  S.  W., 

1895. 
Whewell,  W.     Elements  of  Morality  Including  Polity,  1845, 
Mill,  J.  S.     Utilitarianism,  1863. 
Bain,  A.     Mental  and  Moral  Science,  1868. 

Economic  Aspects  of  Civil  Law 

Lassalle,  F.     System  der  Erworbenen  Rechte,  1861. 

Boehm-Bawerk,  E.  von.  Rechte  und  Verhiiltnisse  vom  Standpunkte 
der  Volkswirtschaftlichen  Gucterlehre,  1881. 

Jourdan,  A.  Des  Rapports  entre  le  Droit  et  TEconomie  Politique, 
1885. 

Wagner,  A.  Volkswirtschaft  und  Recht,  1894,  Part  II  of  Wagner's 
Handbuch. 

Ely,  R.  T.  Property  and  Contract  in  Their  Relation  to  the  Distribu- 
tion of  Wealth,  1914,  2  vols. 

Statistics  and  Sociology 

Gioja,  M.     Filosofia  della  Statistica,  18'26,  2  vols. 

Quetelet,  L.  A.  J.    Du  Systeme  Sociale,  1848. 

Quetelet,  L.  A.  J.     Sur  I'Homme,  Physique  Sociale,  1835. 

Dufau,  F.  P.     Traite  de  Statistique,  1840. 

Knies,  K.     Statistik  als  Selbstiindige  Wissenschaft,  1850. 

Wagner,  A.     Die  Gesetzmassigkeit  in  den   Scheinbar  Willkiihrlichen 

Menschlichen  Handlungen,  1864. 
Block,  M.     Traite  de  Statistique,  1886. 

Mayr,  G.     Die  Gesetzmassigkeit  im  Cesellschaftsleben,  1887. 
Comte,  A.     Cours  de  Philosophic  Positive,  1830-42.     Abridged  version 

in  English  by  Martineau,  H.,  1853. 
Lotze,  R.  H.     Mikrokosmos.  Ideen  zur  Naturgeschichte  und  Geschichte 

der  Mcnschheit,  3  vols.,  1856-64,  especially  vol.  2. 
Carey,  H.  C.     Principles  of  Social  Science,  3  vols.,  1860. 
Bagehot,  W.     Physics  and  Politics,  1873. 
Spencer,  H.     Social  Statics,  1850. 

Spencer,  H.     The  Study  of  Sociology  (methodological),  1873. 
Spencer,  H.     Principles  of  Sociology,  2  vols.,  1876. 
Lilienfeld,     P.    von.      Gedanken    iiber    die     Sozialwissenschaft     der 

Zukunft,  5  vols.,  1873-80. 
Schaeffle,  A.   E.   F.     Bau  und  Leben  des  Sozialen   Korpers,  4  vols., 

1875-78. 
Ward,  L.  F.    Dynamic  Sociology,  2  vols.,  1883. 
Tarde,  G.     Ea  Logique  Sociale,  1894. 

Durckheim,  E.     Les  Regies  de  la  Methode  Sociologique,  1895. 
Giddings,  F.  H.     Principles  of  Sociology,  1896. 
Patten,  S.  N.     The  Tlieory  of  Social  Forces,  in  Annals  of  American 

Academy  of  Political  and  Social  Science,  Januarj',  1896. 
Ratzenhofer,  G.     Die  Soziologische  P'rkenntnis,  1898. 
Small,  A.  W.     The  Meaning  of  Social  Science,  1910. 


334     THE  DEVELOPMENT  OF  ECONOMICS 


B.     ECONOMIC  LITERATURE.     I— SECONDARY  WORKS 

1.  Histories  of  Economics 

General 

Note — Books  marked  with  an  asterisk   (*)   are  specially  desirable  for  Ameri- 
can readers. 

*  Cossa,  L.     Guida  alio  Studio  dell'  Economia  Politica,  1877;  transl. 

into  English  by  Dyer,  L.,  from  third  Italian  edition;   1893. 

*  Haney,  L.  H.     History  of  Economic  Thought,  1911;  revised  edition 

of  1920. 

*  Ingram,  J.  K.     A  History  of  Political  Economy,  1888;  latest  edition, 

1920. 

Kautz,  J.  Geschichtliche  Entwicklung  der  Nationalokonomie  und 
Ihrer  Literatur,  2  vols.,  1860. 

Rambaud,  J.  Histoire  des  Doctrines  ficonomiques,  2  vols.,  1898;  edit, 
of  1902. 

Twiss,  T.  View  of  the  Progress  of  Political  Economy  in  Europe 
Since  the  Sixteenth  Century,  1847. 

Cohn,  G.  History  of  Political  Economy,  in  Annals  of  the  American 
Academy  of  Political  and  Social  Science,  vol.  4,  1894,  a  transla- 
tion of  Cohn's  historical  sketch  in  his  System  der  Nationaloko- 
nomie, 2  vols.,  1885. 

Period  up  to  1776 
Dubois.  A.     Precis  de  I'Histoire  des  Doctrines  ficonomiques,  vol.  1, 

1903. 
Oncken,  A,     Geschichte  der  Nationalokonomie,  1902. 

Period  Since  1776 
Block,   M.     Les    Progr^s    de   la    Science    ficonomique    depuis    Adam 
Smith,  2  vols.,  1890. 

*  Gide,  Ch.,  et  Rist,  Ch.     Histoire  des  Doctrines  ficonomiques  depuis 

les  Physiocrates  jusqu'  a  nos  Jours,  1909.     Translated  into  Eng- 
lish from  French  edit,  of  1913  by  Richards,  R.,  1915. 

Special  Phases  and  Countries 

*  Bonar,  J.     Philosophy   and   Political   Economy   in   Some  of   Their 

Historical  Relations,  1893.     New  edit,  in  1909. 

Boehm-Bawerk,  E.  von.  Kapital  und  Kapitalzins,  2  vols.,  1884-89; 
transl.  by  Smart,  W.,  into  English,  1891. 

Cannan,  E.  A  History  of  the  Theories  of  Production  and  Distribu- 
tion in  English  Political  Economy  from  1776  to  1848,  1893.  New 
edition,  1903. 

Davenport,  H.  J.  Value  and  Distribution,  A  Critical  and  Construc- 
tive Study,  1908. 

Denis,  H.  L'histoire  des  Systi^mes  £conomiques  et  Socialistes,  2  vols., 
1904-07. 

*Higgs,  H.     The  Physiocrats,  1897. 

*  Patten,  S.  N.     The  Development  of  English  Thought,  1899. 


A  WORKING  BIBLIOGRAPHY  336 

*  Price,  L.  L.     A  Short  History  of  Political  Economy  in  England, 

1890;  4.  edit.,  1903. 
Roche-Agussol,    M.      Etude     Bibliographique    des     Sources     de    la 

Psychologic  Economique  chez  les  Anglo-Am^ricains,  1919. 
Roscher,  W.     Geschichte  der  Nationalokonomik  in  Deutschland,  1874. 
Schmoller,  G.     Merkantilismus  und  Seine  Historische  Bedeutung,  1884, 

transl.  in  Economic  Classics,  edited  by  Ashley,  W.  J.  (Macmillan 

Company). 
•Small,  A.  W.    The  Cameralists,  1909, 

2.  Periodicals 
United  States 

American  Economic  Association:  Reports  of  Proceedings  of  Annual 
Meetings,  1886-;  Monographs  published  between  1886  and  1910; 
Economic  Bulletin,  Quarterly,  1908-10;  American  Economic  Re- 
view, 1910- 

Annals  of  the  American  Academy  of  Political  and  Social  Science, 
1890- 

Columbia  University  Studies  in  Histoiy,  Economics,  and  Public  Law, 
1891- 

Journal  of  Political  Economy,  published  for  the  Univ.  of  Chicago, 
1892-1913,  and  since  1913  by  Western  Economic  Society. 

Political  Science  Quarterly,  edited  by  the  Faculty  of  Political  Science 
of  Columbia  University,  1886- 

Quarterly  Journal  of  Economics,  published  by  Harvard  Univ.,  1886- 

Univ.  of  Pennsylvania  Series  in  Political  Economy  and  Public  Law, 
1888. 

The  Yale  Review  (Quarterly),  1892- 

Germany 
Zeitschrift  fiir  die  Gesammte  Staatswissenschaft   (Quarterly),  1844- 
Jahrbiicher  fiir  Nationalokonomie  und  Statistik   (Monthly),  1863- 
Annalen   des  Deutschen   Reichs    fiir  Gesetzgebung,  Verwaltung  und 

Volkswirthchaft    (Monthly),    1868- 
Jahrbuch     fiir    Gesetzgebung,     Verwaltung     und     Volkswissenschaft 
(Quarterly),  1877- 

Englund 
The  Economic  Journal  (Quarterly),  1890- 

France 
Journal   des   ficonomistes    (Monthly),    1843- 
Revue  d'ficonomie  Politique  (Monthly),  1887- 

Italy 
Giornale  deli  Economisti   (Monthly),  1875-78,  and  1886- 

3.  Cyclopedias 

Conrad,   Elster,   Lexis,   and   Loening.      Handworterbuch   der   Staats- 

wissenschaften,  latest  edition,  1908-12. 
Elster,  L.     Worterbuch  der  Volkswissenschaft,  2.  edit,  of  1907. 


336     THE  DEVELOPMENT  OF  ECONOMICS 

Palgrave,  R.  H.  I.     Dictionary  of  Political  Economy,  1894-99,  and 

Supplements. 
Say,     Leon,     and     Chailley.       Nouveau     Dictionnaire     d'J&conomie 

Politique,  1891-92. 

B.     ECONOMIC  LITERATURE.     II— SOURCES 

1.  Eighteenth  Century:  Doctrinal 

a.  English 

Hume,  D.     Political  Discourses,  1752. 

CantiUon,  R.  Essay  upon  the  Nature  of  Commerce  in  General.  Re- 
printed for  Harvard  University  by  Ellis,  G.  H.,  Boston,  1892. 

Steuart,  J.  An  Inquiry  into  the  Principles  of  Political  Economy 
.  .  .  ,  1767. 

Smith,  A.  An  Inquiry  into  the  Nature  and  Causes  of  the  Wealth 
of  Nations,  1776. 

Smith,  A.  Lectures  on  Justice,  Police,  Revenue,  and  Arms  .  .  . 
(from  a  student's  notes  reported  in  1793),  edited  by  Cannan,  E., 
1896. 

Smith,  A.  Essays  on  Philosophical  Subjects,  1795,  edited  by  Black,  J., 
£ind  Hutton,  J. 

Note — Among  books  on  the  antecedents  of  Adam  Smith  one  of  the  most 
useful  to  start  with  is  :  Hasbach,  \V.  Die  Allgemeinen  Philosophischen 
Grundlagen  der  von  F.  Quesnay  und  Adam  Smith  Begruendeton 
Politischen  Oijonomie,  1890.  See  also :  Small,  A.  W.,  Adam  Smith 
and  Modern  Sociology,  1907. 

6.  German 
Justi,  J.  H.  G.  von.     Staatsvvirtschaft,  oder  Systematische  Abhandlung 

aller  okonomischen   und    Kameralwissenschaften,   1755,   2  vols. 
Sonnenfels,  J.  von.     Grundsaetze  der  Polizei,  der  Handlung,  und  der 

Finanz,  1765,  3  vols. 

c.  French 
Quesnay,  F'.     Articles  on  Fermiers  and  on  Grains,  1756-57. 
Quesnay,  F.     Tableau  £conomique,  1758. 
Quesnay,  F.     Maximes  Generales  du  Gouvernement  £conomique  d'un 

Royaume  Agricole,  1763. 
Mirabeau,  Marquis  de.     Philosophic  Rurale  ou  ficonomie  G6n6rale  et 

Politique  de  I'Agriculture,  1763. 
Turgot,   A.   R.  J.     Reflexions   sur   la   Formation   et   Distribution   des 

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See  also  edition  of  Dupon  de  Nemours,  Physiocratio,  1707-78,  2  vols., 
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A  WORKING  BIBLIOGRAPHY  337 


2.  Nineteenth  Centuht 

a.  Methodology 

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342     THE  DEVELOPMENT  OF  ECONOMICS 

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INDEX 


Ago-theory  of  interest,  310 
American     economics,      rise     of, 

244.  ff. 
Association    of    ideas,    basis    for 

ethics,  37,  251,-2 

Bacon,    F.,    on    induction,    81 
Bastiat,     on     natural     liarinoiiics, 

183-1. 
Benthani,  his  hedonism,  123-4 
Influence     on     'riK)ni{)son,     W., 
194 
Boehm-Bawerk,    defining   capital, 
291 
on  interest  rates,  310 
Bowen,   F.,   on   premises   of  eco- 
nomics, 149 

Cairnes,  on  Laissez  Faire 
Capital,     according     to     Physio- 
crats  and   Smith,   165 
as  savings,  178 
according  to  Socialists,  205 
according  to  Marginists,  291-2 
Carlyle,      Th.,      on      competitive 

regime,  198 
Carev    on   mathematical    method, 

283 
Causes,   Mill,   J.   S.,  on  composi- 
tion of,  132,  135-8 
as  price   determinant,  301-2 
Chalmers,  defining  economics,  159 
Circulating  capital,  165-6 
Clark,   J.    B.,    on    natural   value, 

300 
Collectivism  defined,  186 

in  France  since  1750,  189  flf. 
Comte,    influence    on   J.    S.    Mill, 
138-40 
and   Historical  School,  209 
on  social  science  method,  274 


Consumption,  place  in  economics, 
154  and  Table  2 
defined      by      utilitarian      eco- 
nomics, 167   ff. 
according  to  marginism,   294 
Cost,    according    to    physiocrats, 
69-70 
defined  by  utilitarians,  170 
from  marginal  standpoint,  290, 

293,  302-3 
as  long-run  minimum,  304 
Cournot,  on  mathematical  method- 
282 


Davenport,  ethics  and  economics, 
264-5 
on  capital,  292 
Deduction,   Mill's   view,   137-8 
Jevons'  view,  243,  278 
Menger's  view,  279 
Desirabilitv        as        the        good 

(Hobbes),  S-l 
Desire,  through  ideas,  33 

transferred  through  association 
of  ideas,  253-55 
Diminisliing  returns,  not  peculiar 
to  agriculture,  177 
according  to  marginism,  296-7, 
298 
Diminishing  utility,  Paley's  state- 
ment, 251 
Distribution,  place   in  economics. 
Table  2 
as  struggle  for  surjjlus,  177 
marginal  analysis,  305 
Divisional    arrangement    of    eco- 
nomic   treatises,     152-5,     and 
Table  9 
Donisthorpe,  on   aim  of  econom- 
ics,   160 


341; 


344* 


INDEX 


Dynamics,  in  Historism,  209 
according  to  Clark,  J.   B.,  276 
according  to  Fetter,  277 

Economic    interpretation   of   his- 
tory stated,  5-6 
rejected,  6   ff. 
Marxian  view,  2012 
"Economic   man,"    Ricardian   no- 
tion, 119 
Economists  as  philosophers,  102-3 
Economics,  systematized  by   Say, 
110-12 
as  catallactics,  145-6 
as  a  hedonistic  calculus,   255-6 
Economics,   theory    and    commer- 
cial policy,   180 
Empiricism,  doctrine,  29 

bearing   on    rise   of   economics, 
30-1 
Epicureanism,   chief  points,  40 

influence  on  economics,  42 
Ethics,      according     to     Hobbes, 
42-4 
according  to  Locke,  45-6 
in  relation  to  economic  theory, 

120,  156  ff. 
according  to  Historism,  217-19 
according  to  Marginism,  260  ff. 
Expenses,  not  equal  to  price,  303 
defined,  303-4 

Factor,  of   production.   Marginal 
view,  295 
law  of  proportionality,  296-8 
Feelings,  measurable  by  price,  257 

comparable   for  all  men,  258 
Ferguson,   A.,   on   Laissez   Faire, 

50,  87 
Fetter,  on  dynamic  elements,  277 
on  rent  and  law  of  proportions, 
309 
Field     of     economics.     Marginal 
view,  265   ff. 
Menger's  view,  271-2 
inclusive      of     "applied"      eco- 
nomics, Table  4 
Fisher  on  place  of  inlerc-st-Uieory 

in  economics,  311 
Free-trade    discussed    by    econo- 
mists, 180 


German    economists    and    Smith, 

106-9 
Godwin,  W.,  on  private  property, 

193 
Gossen,  chief  doctrines.  Table  3, 
236  flF. 
opposed  to  imputation,  239 
discussing   price-levels,   240-1 
Greek  ethics  and  eighteenth  cen- 
tury thot,  39-41 

Hartley,   ethical   views,    121-3 
Hedonism,  in   Hobbes,  42-5 

in  Locke,  45-6 

and  French  materialism,  123 

in  Jennings'  economics,  251-2 

either  ethical  or  psychological, 
254 

as  basis  of  Marginism,  259 
Hegel,  genetic  views,  103-5 

influence  on  Marx,  199-201 
Historiography,  rise  of,  59 
Historism,  as  economics,  186-7 

on  ethics,  188 

relation  to  Socialism,  205-7 

its   roots,  207-9 

chief  economic  doctrines,  212  ff. 

its  organic  view  of  society,  214- 
6;   230-1 

as    a    German    national    move- 
ment, 220-1 

its  general  contributions,  225 
Historical    vs.    deductive    method 

(Menger),   271-2 
Hobbes,  as  materialist,  31 

as  j)sychologist,  32-4 

on  ethics,  42-5 

on   logic,   81-2 

on  subjectivity  of  value,  250 
Hodgskin,    critic    of    Utilitarian- 
ism, 195 
Human     motives,     according     to 
Wagner,  219 

a^'cording   to   Jevons,   278 
Hume,  on  psychologj',  36  ff. 

on  ethics,  47 

on   scientific   method,  83 

Ideas,    derived    thru    senses,    32-5 
according  to  Hume,  36 
as  basis  of  desire,  255 


INDEX 


345 


Impatience     theory     of     interest, 

310 
Imputation,  in  marginal  distribu- 
tion, 3()J   ff. 
and  ettiics,  308 
Induction,  .levons'  view,  278 
Industrial    evolution,    effects    of, 

95-6 
Ingram,  on  mathematical  method, 

285 
Interest,    not    a    share    in    static 
economics,  310 
Jevons'    productivity   vie-\v,   310 
its  significance  (Fisher),  311 

Jennings,      on      subjectivity      of 

vahie,  229 
psychological  views,  252-3 
.Tevons,   chief   doctrines,   Table   3 
pro<luctivity    theory    of    wages, 

235 
relation  of  utility  to  price,  343 
on  ethics  of  hedonism,  254,  262 
on  basis  of  impatience,  256 
on    feelings   as  basis   of   price, 

257-8 
on  human  motives,  278 
on  mathematical  method,  284 
on  law  of  price,  304 
Justi,   28 

Kameralism,  defined,  26 

in  Gennany.  27 
Keynes,    on    universal    economic 
law,  171 
on  ethics  and  economics,  264 
on    economic    method,    280,   285 
on    consumption    as    divisional 
unit,  294 
Knies,  on  economic  methods,  313 

Labor,  as  measure  of  price,   171 
not    a    measure    of    price,    18 J, 
299 
Hodgskin's     view     relative     to 

capital,  196 
Socialist  view,  304-5 
Laissez   Faire,   Smith's  argument, 

75-80 
as  postulate  for  Utilitarianism, 

183 


I^aw  in  economics,  Keynes  on  law, 
171 

Marginal  view,  267 

compared    with    historical    sci- 
ence,  270-1 
TJst,   F.,    chief    doctrines,    210-12 
i,loyd  on  value,  '2'M) 
Locke,  his  psychology,  35   ff. 

his  ethics,  45-6 

on  scientific  method,  83 

McCulloch,   on   consumption,    167 
Maclycod,      on     subjectivity      of 

value,  230 
Malthusianism,  use  of  theory  and 
its  decline,  176-81,  passim 
for  state  interference,  237 
Marginal   utility,    interchangeable 

with  other  doses,  300 
Marginism,    defined,    236-8 
early  teachings,  231,  236 
compared    with    Utilitarianism, 

228,  322-3 
of  earliest  expounders.  Table  3 
not     related     to     experimental 

psychology,  243 
its     development     after     1880, 

248   ff. 
its  psychology,  249  ff. 
attitude  on  ethics,  260 
its  methodology,   265 
as  a  science  of  values,  267 
a  deductive  science,  377-8 
an  entrepreneur  view,  387 
its  chief  laws,  295  ff. 
its  price  analysis,  333-3 
Market,    defined    by    Marginism, 

393 
Marshall,    ethics    and    economics, 
364 
on   mathematical   method,   285 
Mathematical    method,    note    on, 
281    ff. 
meanings  of,  283 
Menger,  main  doctrines.  Table  3 
on  imputed  values,  239 
on    ethics    and    economics,    262, 

263 
defining  economics,  266 
methodology,   369    ff. 
favoring  deduction,  279 


346 


INDEX 


Mercantilism  defined,  26 
Methodology,  of  Smith,  83-5 

of  J.  S.  Mill,  130  fr. 

of  Historism,  213-5,  222-1. 

of  Marginism,  265  ff. 

best  in  J.  S.  Mill,  143-5,  270 
Mill,  Jas.,  psvchologj',  125-7,  252 
Mill,  J.  S.,  as  psychologist,  31,  33, 
135    (chart) 

position    on    utilitarian    ethics, 
126-7 

an  eclectic,  128-9 

his  methodolog}',  130  flf. 

creator  of  economic  logic,  141-5 

on    value,    163 

on  wages-fund,  178-9 

on  Socialism,   197 
Monopoly  law  of  price,  302 

Naturalism,   in  ethics,  38   ff. 
political  philosophy,  50  ff. 
in  phvsiocracv,  62  ff. 
in  A. 'Smith,  72  ff. 

Organic    view    of    society    (His- 
torism), 214-6 

Pain-pleasure,  as  basis  for  ethics, 
42-6,  251-2 

in   Ricardian  economics,   119-20 
as  basis  for  valuation,  254   ff. 
Paley,  on  natural  law,  53 
on      diminishing      gratification, 
251 
Pantaleoni,  on  hedonistic  basis  of 
economics,    259 
on  law  of  proportions,  297 
Paradox  of  value,  238 
Pareto  on  economic  statics,  275 
Philippovich,    on    subdivisions    of 
economic   science,   261-2 
on  capital,  292 
Physiocrats,    influenced    liy    sto- 
icism, 42,  63 
as    founders    of  social   science, 

62,  319 
and  naturalism,  62-5 
economic  doctrines,  68  ff. 
Pierson  on   consumption    in  eco- 
nomics, 294 


Political  economy  as  art,  accord- 
ing    to     some     Utilitarians, 
157-9 
according  to  Caryle,   198 
Premises,  economic,   specified   by 

Utilitarians,  147-50 
Price,  as  labor-cost,   171-2 
as  supply  and  demand,  173-4 
not    a    basis    for    distribution, 

182 
as   an   average  of  want   inten- 
sities, 242 
from       Marginal       standpoint, 

299   ff. 
Utilitarian  and  Marginal  com- 
pared, 322 
Prices         functionallv         related 

(Walras),  238,  242 
Production,      Physiocratic     view, 
68-9 
Smith's  view,  88 
Say's  view,  112 
defined  by  Utilitarians,  167 
defined  by  Marginists,  290-1 
as     a     division     of    economics, 
Table  2 
Productivity,      Utilitarian      view, 
174 
Marginal  view,  296 
as  theory  of  wages,  306 
Progress,     according     to     Smith, 
89-90 
Socialist   view,   202-3 
view  of  Historism,  223 
Property,     private,     limited      by 
British  economists,  193 
Marxian   view,  202 
as  bacl<ground  to  economic  an- 
alysis, 291 
Proportions,  law  of,  Pantaleoni's 
statement,  297 
Carver's   statement,  298 
bearing  on   rent    (Fetter),   309 
Psvchologv  of  Naturalism,  28  ff. 
Utilitarianism,  118  ff. 
Marginism,  248  ff. 

Quetelet,  215 

Rationalism  in  pliilosophy,  29 
Renaissance  spirit,  17  ff. 


INDEX 


347 


Rent,  Ricardian,  175-6 

criticized   by   Utilitarians,   182 

Marginal  view,  S08-9 
Representative  firm,  ;?03 
Ricardo  and  Smith,  113-5 

on   labor-laws,   177 
Rodbertus   as  critic  of   Utilitari- 
anism, 199 

Say,  J.  B.,  110-2 
Schoenberg,    on     ethics     in     eco- 
nomics, 159 
on  economic  laws,  268 
Schumpeter,    on    chief    economic 
problem,  267-8 
on  statics,  276 
Science,  rise  of,  23-1- 

advance  after  1776,  100  ff. 
Seager,  on   price-law,   301 
Seligman,  on  monopoly  price,  302 
Senior,     on     economic     premises, 
147-8 
on  ethics  in  economics,   159-60 
Sensationalism,     up      to      Hume, 
31    ff. 
in  Utilitarian  economics,  l3l  ff. 
in    Marginal    economics,    251-2 
Shaftesbury   (Third   Earl  of)   on 

morality,  49 
Sismnndi,  191    ff. 
Smith,   A.,  sources  of  his  ethics, 
49.  79 
his  psychologjS  75 
his   Naturalism,  75-7 
argument     for     Laissez     Faire, 

75-80,  89 
idea  of  sympathy,  80 
induction  in  his  work,  83-4 
on  prosperity,  86-8,  90 
on  free-trade,  89 
chief   economic    points,    88    ff., 

114 
compared    with    Ricardo,     114, 

322 
influence  of  his  "Wealth,"  105- 

8,   10!) 
view  of  capital,  165 
Smith,    E.    P.,    on    consumption, 

168 
Socialism,      Hegelian      elements, 
200-1 


Socialism   and    Historisni   in   eco- 
nomics, 205-9 
.Social  science,   genealogy  of  (see 
chart),  60 
logical  method,  130  flF. 
Socio-economic     changes     during 
16th  to  18th  centuries,  24-ti 
after   1776,  92  ff. 
State       interference.       Marginal        -^ 

view,  237 
Statics,  in  stoicism,  51 

in  Utilitarian  economics,  162 
in  Marginal  economics,  273 
according  to   Comte   and   Mill, 

274-5 
related  to  natural  value,  300 
Statistics,  rise  of,  55  ff. 
and   Historism,  214-6 
Steuart,  Jas.,  85 
Stewart,  D.,  on  economics  as  art, 

157 
Stoicism  tenets,  40-1 

influence    on    early    economics, 
50-1 
Structure    of    economic    treatise, 

152-5 
Supply   and   demand,   in   Utilita- 
rian price,  173 
of     factors     and     distribution, 
307-8 

Taxation   among   Physiocrats,    71 
Thiinen,  on  wages,   179 

Utilitarianism,     origins     of     phi- 
losophy, 48 
defined     as     economic     system, 

117-8 
early    psychologv",    121-4 
as    basis    for    Marginism,   250-2 
Utility  defined  by  Marginists,  289 

A'alue,  accordinc:  to   Utilitarians, 

162-4 
subjective  view,  229-31 
Marginal  use  of,  288  ff. 
as  measure  of  feelings,  257 
"absolute,"  288 
"natural,"  299-300 
measured   by    Marginal   utility, 

300-1 


348 


INDEX 


Value,  as  division  in   economics, 

Table  3 
Wages,  Marginal  view,  306 
as  ethical  issue  in  imputation, 
308 
Wages-fund  and  capital,  166,  178 

critics  of,  179-81 
Wagner,  A.,  on  field  of  economics, 
146 
on  premises  of  economics,  150 
on  human  motives,  219 
Walker,  F.,  ethics  and  economics, 
161 
on  consumption,  168 
on  profits,  176 


Walras,  main  doctrines.  Table  3 
interrelating  prices,  238,  242 
Wealth,   Physiocratic  view,   69-70 
individual   vs.  social  view,   164, 

165 
Marginal  view,  290 
Wicksteed,     on     ethics     in     eco- 
nomics, 265 
Wieser,  F.,  comparability  of  feel- 
ings, 258-9 
natural  value,  299-300 
imputation  method,  305  ff. 
Wundt,  W.,  on   economic  postu- 
lates, 150 
on  task  of  economics,  269 


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